Cryptocurrency exchange Kraken has announced that it submitted a total of 56 million crypto transaction forms to the US Internal Revenue Service (IRS) for the 2025 tax year. According to the company’s statement, a significant share of these forms covers small-value transactions, with approximately 18.5 million reporting trades of less than $1 and more than half documenting transfers at or below $10.
Mounting tax burdens with Form 1099-DA
Details shared by Kraken reveal that just 8.5% of the new Form 1099-DA filings reported transactions above $600, the threshold in the US that triggers mandatory reporting as nonemployee compensation. Meanwhile, 74% of the 1099-DA forms reflected transactions at or below $50.
Each reporting form must be sent both to the IRS and to the relevant customer, creating a heavy administrative workload for investors with high trading activity. Kraken estimates that regular crypto users may need to spend between $250 and $500 per year on additional tax software—costs that come on top of standard filing obligations.
“The hours taxpayers spend reconciling these micro-transactions based on incomplete data impose disproportionate costs compared to the revenue collected by the IRS,” the company noted.
Data from the US Tax Foundation shows that individual tax returns already cost Americans a cumulative $146 billion. The National Taxpayers Union states that the average person spends 13 hours completing their return, resulting in an extra financial burden of $290 per filing.
Problems with gross proceeds and missing cost information
Kraken warns that for the 2025 tax period, brokers are required to report “gross proceeds”—meaning the sales value of each transaction—without supplying the original acquisition cost of the crypto asset. The exchange reports that thousands of its clients have reached out due to confusion arising from only the sale side being reported.
Two main regulatory challenges make the situation even more complex. First, there is no “de minimis” exemption for small crypto payments in the US, so even a minor cash equivalent transaction with crypto—as little as $1—still triggers a tax reporting obligation. Kraken notes that paying a restaurant bill of $7.99 with Bitcoin is technically a taxable event and requires the user to identify and report the cost basis of the Bitcoin used.
The Cato Institute recently expressed a similar concern, highlighting that even buying a daily coffee with BTC could generate dozens of pages of tax documentation.
Controversy over staking income and phantom gains
A second contentious issue centers on the taxation of staking rewards. Under the current rules, any tokens earned from staking are considered income at their market value on the day received, immediately generating a tax liability—even if users do not sell their tokens and simply hold onto them.
If the value of a token drops after rewards are received, investors can end up paying more in taxes than what their coins are actually worth. Kraken stated that a significant portion of the 1099-DA forms reporting less than $1 in rewards stems from staking distributions.
A bill advancing in Congress calls for a partial exemption for small stablecoin transactions. However, Kraken argues for a broader exclusion covering all crypto assets, one that would be indexed to inflation and include safeguards against misuse. The exchange also advocates granting users the choice to recognize staking income either at the time of reward or upon sale, emphasizing that the necessary technical systems are already in place but require legal permission to implement.
