IRS Bitcoin Rules: What You Must Report in 2025

When you own Bitcoin, a decentralized digital currency tracked on a public ledger. Also known as BTC, it's treated by the IRS as property, not money. That means every time you sell, trade, or spend it, you might owe taxes. This isn’t optional. Starting in 2025, the IRS is cracking down harder than ever, and you can’t ignore it.

The big change? Form 1099-DA, a new IRS form designed to track crypto transactions across wallets and exchanges. It’s not just for big investors. If you bought Bitcoin on Coinbase, traded it on Uniswap, or got it as a gift, you need to report it. The IRS now requires exchanges and DeFi platforms to report your activity — even if you moved crypto between your own wallets. And if you inherited crypto or gave it away? That’s taxable too. No more hiding behind "I didn’t cash out." Crypto cost basis, the original value of your crypto when you acquired it is now critical. You can’t just guess. You need records: when you bought it, how much you paid, and what fees you paid. If you can’t prove it, the IRS assumes your cost basis is $0. That means you pay tax on the full sale amount — even if you only made $50 profit.

People think the IRS can’t track crypto. They’re wrong. Exchanges like Binance, Kraken, and Coinbase are now legally required to send data to the IRS. Even decentralized platforms that handle swaps or staking are being pressured to comply. If you used a privacy bridge like Monsoon Finance or a sidechain like Polygon to avoid detection, that doesn’t help. The IRS doesn’t care how you moved it — they care that you moved it.

And it’s not just about selling. Trading Bitcoin for Ethereum? Taxable event. Using Bitcoin to buy a laptop? Taxable event. Getting airdropped tokens? Taxable event. Even if you didn’t convert it to dollars, the IRS sees it as a sale at fair market value the moment you gain control. The penalties aren’t small either. Missing a report can mean fines up to 75% of the tax owed — plus interest. In extreme cases, especially if the IRS thinks you’re hiding income on purpose, it can lead to criminal charges.

You don’t need to be a tax expert to get this right. But you do need to start tracking. Use a simple spreadsheet. Save your transaction history. Know your cost basis. If you got crypto as a gift or inheritance, document the original owner’s cost basis — or you’ll pay more than you should. And if you’re unsure? Talk to someone who’s handled crypto taxes before. Not a YouTube guru. A real CPA who’s filed Form 1099-DA for clients.

Below, you’ll find real guides on what the IRS actually wants, how to avoid common mistakes, and what happens if you don’t comply. No theory. No guesswork. Just what you need to stay legal in 2025 — whether you own one Bitcoin or a hundred.

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