Record Keeping for Crypto Taxes: Your 2025 Compliance Guide
Every time you buy, sell, trade, or even receive crypto as a reward, the IRS sees a taxable event. Not just once a year. Not just for big trades. Crypto tax records must track every single transaction - even that $12 ETH you swapped for a meme coin last January. If you don’t have the paperwork, you’re not just risking an audit. You’re risking penalties, interest, and worse.
Why Your Crypto Records Are More Important Than Ever
Starting January 1, 2025, the rules changed. The IRS no longer lets you average your cost basis across all your wallets. Now, you must track cost basis wallet by wallet. That means if you bought Bitcoin in Wallet A in 2021 and transferred it to Wallet B in 2023, then sold it in 2025, you need to know exactly what you paid for it in Wallet A - not what it’s worth now, not what you paid in Wallet C. The IRS wants the original purchase price, the exact date, and which wallet held it when you sold.
And it’s not just sales. Every time you earn crypto - from staking rewards, mining, airdrops, or even getting paid in Bitcoin - that’s income. The IRS treats it like a paycheck. You owe income tax on the fair market value the moment you receive it. Then, if you later sell it, you owe capital gains tax on the difference between that value and what you sold it for.
Exchanges like Coinbase and Kraken now send Form 1099-DA to the IRS for every sale or exchange you make. That means the IRS already knows what you sold, when, and for how much. If your records don’t match what they have, you’ll get a letter. And if you can’t prove your cost basis? You’ll pay tax on the full sale amount - even if you broke even or lost money.
What Exactly Do You Need to Track?
You need a clear, chronological log of every crypto action. Here’s the non-negotiable list:
- Buy transactions: Date, amount of crypto, fiat value at time of purchase, wallet address received, payment method (bank, card, etc.)
- Sell transactions: Date, amount sold, fiat value received, wallet address sent from, purpose (e.g., “paid rent,” “traded for ETH”)
- Trade/exchange transactions: What you traded, what you received, dates of both sides, fair market values for both, wallet addresses involved
- Staking rewards: Date received, amount, USD value at receipt, wallet address
- Mining income: Date mined, amount, USD value at receipt, electricity and equipment costs (for deductions)
- Airdrops: Date received, amount, USD value at receipt, source (e.g., “Uniswap airdrop”)
- Wallet transfers: Even if you’re just moving crypto between your own wallets, record the date, amount, and reason. Why? Because if you later sell from Wallet B, the IRS needs to know the original cost basis came from Wallet A.
Don’t forget: If you earn crypto as a freelancer or business owner, you also owe self-employment tax. That means keeping track of gross income and business expenses on Schedule C - just like you would with cash payments.
The New Form 1099-DA and What It Means for You
Form 1099-DA is the biggest change since crypto taxes became a thing. Starting in early 2026, you’ll get this form from every exchange or payment processor you used in 2025. It will list every sale or exchange you made, the gross proceeds, and the date. But here’s the catch: it doesn’t include your cost basis. It doesn’t tell you what you originally paid. That’s still your job.
So even if you get a 1099-DA, you still need to file Form 8949 and Schedule D. Form 8949 is where you list every single disposal - every sale, trade, or gift - with the date acquired, date sold, proceeds, cost basis, and gain or loss. The IRS cross-checks this against your 1099-DA. If your numbers don’t add up, you’re flagged.
And if you used decentralized exchanges (DEXs) like Uniswap or Osmosis? Or self-custody wallets like Ledger or Phantom? Those don’t issue 1099s. You’re 100% responsible for tracking those transactions. No one else will do it for you.
Why Wallet-by-Wallet Accounting Is a Game-Changer
Before 2025, you could use FIFO (first in, first out) or average cost across all your holdings. Now, you can’t. The IRS requires you to track cost basis per wallet. Why? Because they suspect people are moving assets between wallets to manipulate gains and losses.
Example: You bought 1 BTC in Wallet A for $30,000 in 2021. You bought another 1 BTC in Wallet B for $60,000 in 2024. In 2025, you sell 1 BTC from Wallet B for $70,000. Under the old rules, you might’ve claimed you sold the cheaper one and paid less tax. Now, you have to prove you sold the one from Wallet B - and your gain is $10,000, not $40,000. But if you didn’t document that transfer from Wallet A to Wallet B in 2024? The IRS may assume you sold the $30,000 coin and tax you on $40,000 profit.
This makes manual record keeping nearly impossible for active traders. That’s why most people now use crypto tax software.
Crypto Tax Software: Your Best Friend (Not a Shortcut)
Tools like Koinly, CoinTracker, and ZenLedger connect to your exchanges via API and import your transaction history. They calculate your cost basis, classify gains and losses, and generate Form 8949 and Schedule D automatically.
But here’s the truth: these tools aren’t magic. They can’t track everything.
- They can’t auto-import transactions from hardware wallets unless you manually upload CSVs.
- DeFi activities - liquidity pools, yield farming, flash loans - often need manual entry.
- Cross-chain swaps (like bridging ETH from Ethereum to Arbitrum) can confuse the software.
- Privacy coins like Monero or Zcash? Most tools ignore them. You’re on your own.
Best practice: Use software as your backbone, but keep your own backup. Export your transaction history from every exchange. Save screenshots of blockchain confirmations. Keep emails from exchanges confirming deposits and withdrawals. If the software crashes or your account gets locked, you need paper trails.
What Happens If You Don’t Keep Records?
The IRS has hired blockchain analysts from Chainalysis and other firms. They can trace transactions from exchange to wallet to wallet - even if you used multiple platforms. They match wallet addresses to your identity through KYC data from Coinbase, Binance, etc.
If you’re caught underreporting:
- You’ll owe back taxes + interest (compounded monthly)
- You’ll face a 20% accuracy-related penalty
- If they prove fraud? That’s a 75% penalty - and possible criminal charges
Real story: A trader in Texas didn’t report 18 months of DeFi rewards. He thought “it’s just crypto, no one’s watching.” The IRS matched his wallet to his bank account through a Coinbase withdrawal. He owed $87,000 in taxes, penalties, and interest. He lost his home.
Don’t wait until April to start. If you’ve held crypto since 2020 or earlier, you’re already behind. Catch up now - before the next audit wave hits.
How to Start (Even If You’re Behind)
It’s not too late. Here’s how to get back on track:
- Collect everything: Log into every exchange, wallet, and DeFi platform you’ve ever used. Download all transaction history. Look through old emails for confirmation receipts.
- Use a free tool: Upload your data to Koinly or CoinTracker’s free tier. See what gaps exist. You’ll immediately spot missing transactions.
- Fix the gaps: For missing airdrops or staking rewards, check blockchain explorers like Etherscan or Solana Explorer. Search your wallet address - you’ll see every incoming transaction.
- Amend past returns: File Form 1040-X to correct 2021-2024 returns if you missed crypto income. The IRS has a “voluntary disclosure” program that reduces penalties if you come forward before they contact you.
- Set up a system: From now on, log every transaction in a spreadsheet or app the same day it happens. Don’t wait.
Keep It for How Long?
The IRS says keep records for at least three years after filing your return. But for crypto? Keep them for seven. Why? Because if the IRS suspects fraud, they can go back six years. And if you’re self-employed and earned crypto income? That’s a seven-year window.
Store your records in two places: cloud backup (Google Drive, Dropbox) and an external hard drive. Don’t rely on one source. Exchanges shut down. Wallets get lost. Emails get deleted. Your records are your legal armor.
Final Tip: Treat Crypto Like a Business
If you’re trading regularly, earning crypto as income, or running a DeFi operation - treat it like a business. Keep separate bank accounts. Track expenses. Document everything. The IRS doesn’t care if you think crypto is “fun money.” Legally, it’s property. And property has a paper trail.
Don’t wait for the audit letter. Don’t hope the IRS forgets. Start today. Your future self - and your bank account - will thank you.
Do I need to report crypto transactions under $10?
Yes. The IRS doesn’t have a minimum threshold. Even a $2 swap between tokens counts as a taxable event. You must report every transaction, no matter how small.
What if I lost access to an old wallet?
If you can’t access the wallet, you can’t prove the cost basis. The IRS may treat the entire value of the coins as gain when you sold them later. To avoid this, always back up wallet keys and record transaction details before moving funds. If you lost coins, document the loss and consult a tax pro - you may be able to claim a capital loss.
Are crypto-to-crypto trades taxable?
Yes. Trading BTC for ETH is treated as selling BTC and buying ETH. You must calculate the capital gain or loss on the BTC sale based on its original cost basis. There’s no tax-free exchange like there is with stocks.
Do I need to report crypto received as a gift?
You don’t owe tax when you receive crypto as a gift. But when you later sell it, your cost basis is the same as the donor’s original purchase price. You must get that info from them - or you’ll pay tax on the full sale amount.
Can I use FIFO or average cost for crypto anymore?
No. As of January 1, 2025, the IRS requires wallet-by-wallet accounting. You must track cost basis per wallet, not across your entire portfolio. This eliminates FIFO and average cost as default methods for U.S. taxpayers.
What if I’m a non-resident with U.S. crypto income?
If you’re a non-resident alien and earn crypto from U.S.-based exchanges or services, you may still owe U.S. taxes. The rules vary based on your country’s tax treaty with the U.S. Consult a cross-border tax specialist - don’t guess.
Okay, so let me get this straight - the IRS now wants wallet-by-wallet cost basis tracking? Like, if I moved 0.5 BTC from Wallet A to Wallet B in 2023 and sold it in 2025, I have to dig up a blockchain explorer screenshot from 2021 showing the exact purchase price, plus the wallet address I used back then, and the timestamp of the transfer? And if I didn’t screenshot it? I pay tax on the full sale amount? That’s not record-keeping - that’s digital archaeology. I’ve got 14 different wallets across exchanges, DeFi protocols, and hardware devices. I’m not a CPA. I’m just trying to not get audited before my coffee even cools down.
And don’t even get me started on cross-chain swaps. I bridged ETH from Ethereum to Arbitrum last year - the tax software thought it was a sale and a purchase. It flagged a $12,000 ‘gain’ when I literally just moved it. I spent three hours manually correcting it. The IRS doesn’t even understand DeFi, but they expect me to explain it to them in Form 8949?
Also - why is there no official IRS crypto ledger template? Why do we have to cobble together Google Sheets and CSV exports like we’re building a spaceship out of duct tape and hope?
I’m not even mad. I’m just exhausted.
And yes - I’ve been keeping records since 2020. I’m still behind. I know. I’m working on it. But this system is broken.
OMG YES!!! 😭🙌 I just spent 11 hours last weekend trying to reconcile my 2023 trades… and I still missed 3 airdrops 😅 I use Koinly but it didn’t catch my Phantom wallet transfers… and then I realized I’d forgotten about that one time I swapped 0.02 ETH for a Doge meme coin and thought ‘nah, it’s too small’… and now I’m sweating bullets thinking the IRS is gonna come knock knock knock 🚨
Just downloaded all my exchange histories. Going to upload them again. Praying. 🙏
Also - if you lost a wallet? Don’t panic. Just write ‘lost private key’ and attach a screenshot of your backup notes. They’ll probably let you off with a warning if you’re honest. I think. Maybe. I hope.
WE GOT THIS, FAM. 💪
There’s a deeper truth here that no one’s talking about: the IRS isn’t trying to punish crypto users. They’re trying to force us into the same accountability structures that have governed financial behavior for centuries.
For decades, cash transactions were the wild west - untraceable, untaxed, unregulated. And look what happened: tax evasion became normalized. Crypto is just the new cash. The same impulse - to avoid scrutiny - is driving people to ignore records.
But here’s the thing: if you treat crypto like a game, you’ll get treated like a child. If you treat it like property - like land, like stocks, like art - then the rules become clear. You don’t need to be an accountant. You just need to be consistent.
The real problem isn’t the complexity of the system. It’s the cultural myth that crypto exists outside of law. It doesn’t. It never did.
So yes - track your wallets. Yes - export your CSVs. Yes - backup your keys. Not because the IRS is watching. But because you deserve to own your financial history - not have it stolen by negligence.
I just started using a spreadsheet. One tab per wallet. Date, amount, value, wallet, purpose. Took me 2 hours for 2024. Worth it.
Don’t overthink it. Just start.
Wait… so the IRS is now the crypto police? 😂
Next they’ll be sending agents to my house to check if my Ledger is plugged in. 'Sir, we have reason to believe you held 0.003 BTC in a wallet you haven't accessed since 2021. Please produce the private key or face penalties.'
And why are they only targeting crypto? I bought a painting in 2019 for $500 and sold it for $1200 last year. Did I file a capital gain? Nope. Did the IRS care? Nope. But crypto? Oh no. Now we’re all criminals.
They don’t want records. They want control.
And I’m not playing.
🚀
you think this is bad wait till they start tracking your ip address when you connect to metamask
they already know everything
your phone knows where you are
your bank knows when you bought eth
your exchange sent them your id
you think you're anonymous
you're not
they've had you since day one
just pay the tax and shut up
your crying won't change the blockchain
it's all recorded
forever
you're not special
you're just data
Interesting that the IRS is enforcing wallet-by-wallet accounting. It’s a logical step - if you’re using multiple wallets, each holds distinct cost basis data. Not tracking it is like claiming you bought a car in 2018 but not knowing which dealership you bought it from.
That said, the burden on casual users is immense. Most people don’t realize that airdrops are taxable until they get a 1099-DA and panic.
Also - if you’re using DeFi, you’re essentially running a small business. You need bookkeeping. No way around it.
Use CoinTracker. Export CSVs. Save blockchain explorers. Do it once. It’ll save you years of stress later.
Let me tell you something nobody else will
you think you're being punished for not keeping records
no
you're being punished for being poor
the rich have accountants who file their crypto gains before they even sell
the rest of us are scrambling through spreadsheets at 3am
the IRS doesn't care if you're broke
they care if you're visible
and if you're visible
you're a target
they don't want your money
they want you to know you're powerless
and that's the real tax
the shame
the fear
the sleepless nights
you're not failing at taxes
you're failing at capitalism
Oh wow the IRS is finally acting like a real government agency. Took them long enough.
Meanwhile, the same people who scream 'taxation is theft' are now crying because they have to prove they didn't just steal 1000 ETH from a rug pull and call it 'income'.
Get a grip. You didn't 'earn' crypto by being lucky. You gambled. And gambling winnings are taxable. Period.
Stop pretending crypto is some anarchist fantasy. It's money. And money has rules.
If you can't handle rules, don't play the game.
And if you're using Monero? Good luck. You're not just dodging taxes - you're dodging reality.
And if you think the government is 'out to get you'? Then why are you using a US-based exchange that requires your SSN?
Choose a side. You can't be both a libertarian and a Coinbase user.
Wake up.
USA FIRST.
NO MORE CRYPTO ANARCHY.
Man, I used to think crypto was about freedom - decentralized, borderless, unshackled from the man.
Now it’s just… paperwork.
Like, I get it. The IRS isn’t evil. They’re just trying to catch up to a world that moved faster than their 1980s tax code.
But here’s the real kicker - the tools we use to track this stuff? They’re all built by private companies. Koinly, CoinTracker, ZenLedger - they’re the new middlemen. And they’re not free. And they can go dark tomorrow.
So what’s the real revolution? Not blockchain. Not DeFi.
It’s open-source, self-hosted crypto tax tools that anyone can audit.
Until then? We’re trading one system of control for another.
Still worth it? Maybe.
But we should be building better.
Not just surviving the audit.
But rewriting the game.
Hey - if you’re feeling overwhelmed, you’re not alone.
I started in 2021 with zero records. Just panic and a Google Sheet.
Now I have a system: every Friday, I spend 20 minutes logging anything I did that week.
It’s not perfect.
But it’s consistent.
And that’s what matters.
You don’t need to be perfect.
You just need to show up.
One small step at a time.
You’ve got this. 💛
They’re using this to track us. That’s not a tax law - it’s a surveillance tool.
Every wallet address. Every transfer. Every airdrop. Every time you open your MetaMask.
They’re building a financial profile of every crypto user.
Next thing you know - you can’t buy a house because your crypto gains ‘look suspicious’. Or your credit score drops because you ‘earned too much’ from staking.
And the worst part? They’ll say it’s for ‘fairness’.
But fairness doesn’t need a blockchain tracker.
It needs privacy.
They don’t want your money.
They want your autonomy.
And they’re using ‘tax compliance’ to take it.
Don’t be fooled.
They’re not auditing your crypto.
They’re auditing your freedom.
💔