Crypto Exchange Tax Reporting to IRS Creates Complications for Users

WHY IT MATTERS

When you sell stocks through a brokerage, that brokerage tells the IRS how much money you made. Now crypto exchanges are doing the same thing. The problem is that crypto works differently from stocks. Imagine buying a book at one store, then returning it at a different store. The second store does not know what you originally paid, so it might report the wrong profit to the IRS. Similarly, if you buy crypto on one exchange and sell it on another, the selling exchange may not know your original purchase price and could report higher gains than you actually earned. This means crypto users need to keep careful personal records of all their transactions to ensure their tax filings are accurate, because the IRS may assume the exchange-reported numbers are correct unless the taxpayer proves otherwise.