💱 Crypto Exchanges Explained — What the IRS Sees (and What You Must Report)
Every crypto exchange you use — whether U.S.-based or international — creates taxable data visible to the IRS. With new 2025 reporting rules, exchanges must issue Form 1099-DA, track transfers, and report customer activity across platforms.
This guide explains how exchanges work for tax purposes and what you must disclose on your own return.
📖 Table of Contents
1️⃣ How Crypto Exchanges Work (Centralized vs Decentralized)
Crypto exchanges fall into two categories: Centralized (CEX) and Decentralized (DEX).
The IRS treats these differently for compliance and reporting.
💠 Centralized Exchanges (CEX)
- Examples: Coinbase, Kraken, Binance US
- KYC identity verification required
- Transaction records available through CSV/API
- Subject to IRS reporting requirements
💠 Decentralized Exchanges (DEX)
- Examples: Uniswap, PancakeSwap
- No identity verification
- No account history
- You must self-track every swap and fee
Tax Rule:
All DEX swaps are taxable events — even if the platform never sends you a 1099.
2️⃣ What Exchanges Report to the IRS (1099-DA Rules)
Starting in 2025, the IRS requires many exchanges to issue Form 1099-DA
reporting digital asset sales and transfers.
Exchanges may report:
- Sales proceeds
- Acquisition date (when available)
- Cost basis (for supported assets)
- Wallet-to-wallet transfers
- Customer identity and account information
Important:
Receiving a 1099-DA means the IRS has a record of your activity — you must match or explain differences.
3️⃣ Transfers Between Exchanges & Tax Mistakes
Transfers between your own wallets and exchanges are non-taxable,
but the IRS may think they are sales if you don’t label them correctly.
- CEX ➝ CEX transfers
- CEX ➝ DEX transfers
- DEX ➝ hardware wallet
Example:
You transfer 2 ETH from Coinbase to MetaMask.
If software sees “outflow from Coinbase” but not the destination wallet, it may treat it as a sale → wrong taxable gain.
4️⃣ Using Multiple Exchanges — Recordkeeping Tips
Many investors use 3–5 exchanges at the same time.
To avoid mismatched reporting, follow these best practices:
- Export all CSVs at year-end
- Use tax software to merge duplicate records
- Track wallet addresses used for transfers
- Record gas fees for DEX transactions
- Keep documentation for closed or bankrupt exchanges
Tip:
Save exchange histories at least once per quarter — platforms can shut down without warning.
5️⃣ Real Examples You’ll See on a Tax Return
Example 1: Coinbase Sale
- Sold 0.5 BTC
- Proceeds: $22,000
→ Appears on Form 1099-DA
Example 2: Binance US ➝ Kraken Transfer
Non-taxable transfer — but must be tagged correctly in software.
Example 3: DEX Swap
Uniswap swap is taxable even if no 1099 exists.
❓ Frequently Asked Questions
Q1. Will every exchange issue Form 1099-DA?
Not all — but many U.S.-based and some foreign exchanges will.
Q2. Are DEX swaps visible to the IRS?
Yes. They can be traced on-chain even without a 1099.
Q3. What if an exchange shut down and I lost records?
Use bank statements, blockchain explorers, and any old CSVs to rebuild records.
🔗 Reference Links
These are other eBooks published by EA Tax Guide and currently available on Amazon.
This section contains Amazon affiliate links.
핑백: 2025 Scholarship & Grant Tax Rules