In the 2025 tax year, cryptocurrency exchange Kraken filed approximately 56 million crypto-transaction forms with the U.S. Internal Revenue Service (IRS). Notably, around 18.5 million of these forms pertained to transactions valued at less than $1, with over half being for $10 or less.
According to a recent blog post by the company, only 8.5% of the newly introduced Form 1099-DAs exceeded the $600 threshold, which triggers reporting for non-employee compensation, while 74% were for less than $50. Each form is also sent to the customer, resulting in a reconciliation task for the taxpayer. Moreover, standard tax software is not equipped to handle cryptocurrency transactions, leading Kraken to estimate an additional burden of $250-$500 per year for active cryptocurrency holders, beyond standard filing costs.
The company emphasized that the time spent by taxpayers reconciling these micro-transactions, often with incomplete data, generates costs that are disproportionately high compared to the revenue the IRS will collect from them. The Tax Foundation estimates that individual returns already cost Americans a combined $146 billion in time and expenses, while the National Taxpayers Union Foundation reports that the average time for non-business filers is around 13 hours and $290 per return.
For the 2025 tax year, brokers are required to report gross proceeds without cost basis, meaning the form only shows what was sold, not what it was bought for. Kraken noted that it received thousands of client inquiries about forms that only captured one side of the calculation.
The company identified two issues with the tax code: the lack of a de minimis exemption for cryptocurrency payments and the treatment of staking rewards as ordinary income at the moment of receipt. As an example, Kraken explained that purchasing a meal with Bitcoin can trigger a taxable event, requiring the buyer to calculate and report any gain or loss on the transaction.
Similarly, the Cato Institute has argued that buying a cup of coffee daily with Bitcoin can result in over 100 pages of tax filings. Regarding staking rewards, Kraken pointed out that they are treated as ordinary income at the moment of receipt, based on the token's market price that day. However, most holders do not sell these tokens, resulting in a tax liability on assets that have not been sold. If the token price falls between receipt and filing, the tax can exceed the asset's current value, which Kraken refers to as 'phantom income.' The company noted that a significant portion of the sub-dollar 1099-DAs it issued were staking distributions.
To address these issues, Kraken is advocating for legislation that includes a broader, inflation-indexed exemption for cryptocurrency transactions, paired with anti-abuse guardrails to prevent structuring. Additionally, the company is pushing for taxpayers to have the option to elect when staking rewards are taxed, either at receipt or at sale, when a gain or loss is realized.