A joint report from Coinbase and CoinTracker found that a majority of U.S. retail crypto users still do not understand one of the most basic tax rules in the market: selling crypto is a taxable event. Only 49% of surveyed investors answered that correctly, a result that exposes a persistent gap between user participation in digital assets and their readiness to meet tax obligations.
That knowledge deficit is becoming more important as reporting requirements tighten. The arrival of Form 1099-DA and related IRS changes is turning what was already a confusing process into a more immediate source of compliance and user-experience friction for both investors and platforms.
Fragmented wallets and incomplete records are making tax reporting harder
The report shows that the problem is not just educational, but operational. Crypto users are often managing activity across too many disconnected services for tax reporting to feel simple or reliable. Respondents said they used an average of about 2.5 separate platforms or wallets, while 83% reported using self-custodial solutions.
That fragmentation creates a direct obstacle to calculating cost basis correctly. Without a complete transaction history across custodial and self-custodial environments, many users cannot easily determine their taxable gains or losses. The report found that only 35% of respondents had historically adjusted cost basis, suggesting that most users are still operating without one of the core inputs required for accurate tax reporting.
The result is a process that often becomes manual, slow and error-prone. Many investors are being pushed into piecing together records themselves or paying for outside help, increasing the chance of underreporting, overpaying or making portfolio decisions based on misunderstood tax exposure.
The 1099-DA rollout is raising the pressure on users
The report also found that 61% of respondents were unaware of the IRS reporting changes tied to 2025 returns, including the introduction of Form 1099-DA. That lack of awareness means many users are heading into a more demanding reporting environment without realizing how much responsibility will still fall on them.
Coinbase expects to issue more than four million 1099-DA forms, but the reporting structure leaves a major gap. Brokers may report gross proceeds, yet they will not necessarily provide the original cost basis, forcing taxpayers to do the most difficult part of the reconciliation themselves. That imbalance turns tax filing into a forensic accounting exercise, especially for active traders and users involved in decentralized finance.
CoinTracker’s Shehan Chandrasekera described the issue as uniquely hard to solve, and the report makes clear why. When users do not fully understand tax triggers and also lack unified transaction histories, compliance becomes a high-friction task that affects confidence, behavior and platform support demands.
The real issue is no longer willingness, but usability
What stands out in the findings is that many users appear willing to comply, but still struggle to do so effectively. The biggest barrier is not intent, but the lack of clear guidance and connected data across the products people actually use. That turns tax reporting into a usability problem as much as a legal one.
Reducing tax friction now requires better product design, including clearer onboarding, easier cost-basis imports, more visible 1099-DA guidance and simpler reconciliation flows. Streamlined import tools and better in-app education could reduce manual work, shorten reporting time and improve accuracy for users who are otherwise left trying to solve a complex tax problem on their own.