#What Should Crypto Users Know About Tax Reporting?
Crypto users must be aware of their tax reporting requirements. Starting in tax year 2025, PayPal will send out IRS Form 1099-DA to those who engage in transactions involving digital assets, including cryptocurrency and PayPal’s own stablecoin, PYUSD. If you sold or exchanged any crypto through your PayPal wallet during the applicable tax year, expect to receive this form automatically by February 15 each year.
The introduction of Form 1099-DA by the IRS aims to ensure a standardized approach to reporting digital asset transactions. This will help brokers, like PayPal, meticulously track and report gains or losses connected to cryptocurrency trading, making it easier for you to stay compliant with tax obligations.
In addition to Form 1099-DA, PayPal will also provide Form 1099-MISC for any crypto bonuses, prizes, or awards exceeding $600 during tax year 2025. This threshold increases to $2,000 in 2026, with adjustments for inflation set to take effect in 2027. If you receive crypto payments for goods and services that exceed specific annual thresholds, you will receive Form 1099-K by January 31.
Understanding these tax implications is crucial as digital assets become increasingly integrated into financial transactions. Keeping track of your trading activities and payments can help you meet your tax obligations effectively while maximizing your investment outcomes.