Crypto exchange Kraken claims to have filed 56 million crypto transaction forms with the United States Internal Revenue Service (IRS) for fiscal year 2025. About 18.5 million of them covered transactions worth less than $1, and more than half covered transactions worth $10 or less.
Only 8.5% of newly introduced 1099-DA forms exceeded $600, the threshold that triggers non-employee compensation reporting, and 74% were for less than $50, the company said in a blog post published Wednesday.
Each form is also sent to the client and creates a reconciliation task for the receiving taxpayer. Additionally, standard tax software does not handle crypto transactions. Kraken estimated the additional charge for an active crypto holder at between $250 and $500 per year for dedicated tax software, on top of standard filing fees.
“The hours taxpayers spend reconciling these micro-transactions, often with incomplete data, generate costs that are wildly disproportionate to the revenue the IRS will collect from them,” Kraken said.
The Tax Foundation estimates that individual filings already cost Americans $146 billion in time and expenses, the exchange said, and the National Taxpayers Union Foundation estimates the average time for nonprofessional filers at about 13 hours and $290 per return.
Broker reports for 2025 provide gross proceeds without cost, meaning the form shows what was sold, but not what it was purchased for. Kraken said it answered thousands of customer questions on forms that captured only one aspect of the calculation.
Two problems
Kraken pointed out two parts of the tax code that are problematic. One is the absence of one de minimisor low-level exemption for crypto payments, meaning even small purchases with crypto can trigger a taxable event that must be reported.
“Imagine you walk into a Steak ‘n Shake and pay for a $7.99 meal with Bitcoin through a payment app. You have triggered a taxable event,” Kraken wrote as an example. “You are technically required to research the cost basis of the specific Bitcoin you spent, calculate whether you had a gain or loss on that fraction of a coin, and report it on Form 8949.”
This is the same argument made recently by the libertarian think tank Cato Institute. According to the institute, buying a cup of coffee every day with BTC “can result in more than 100 pages of tax returns.”
The second problem is staking. Rewards earned on staked assets are treated as ordinary income at the time of receipt, based on the market price of the token on that day. Most holders hold on to these tokens instead of selling them, which means they owe taxes on the tokens that weren’t sold.
If the price of the token falls between receipt and deposit, the tax may exceed the current value of the asset. Kraken calls it phantom income and claims that a large portion of the less than $1 1099-DAs it issued were staking distributions.
Legislation before Congress includes a de minimis provision, but is limited to stablecoins. Kraken is pushing for a broader exemption indexed to inflation, combined with anti-abuse safeguards to prevent structuring.
The exchange is also asking Congress to allow taxpayers to choose when staking rewards are taxed, either upon receipt under current rules or upon sale, when a gain or loss is realized.
Kraken says its systems and those of other exchanges already support both reporting methods, but the choice must be allowed.
