Imagine this: You're a small business owner, finally taking the leap into accepting crypto payments. Instead, you cruelly and callously scan and snag every last dime. And then, wham, an IRS audit notice appears in your mailbox. The culprit? A mistaken 1099-DA that’s automatically created by your cryptocurrency exchange. Now, you’re knee deep in HR filings, legal bills, and sleepless nights—all because of someone else’s mistake. This isn’t a what-if, it’s the current day-to-day reality for millions of Americans stuck in the crypto tax trap. And you, whether you understand it or not, are footing the bill.

Inaccurate Forms: Systemic Negligence Exposed

New IRS 1099-DA regulations to be introduced would provide much needed guidance on how crypto should be taxed. They’re sure to trigger an avalanche of speculative reporting in the opposite direction instead. DeFi Tax is leading a multi-year investigation and has found systemic, industry-wide flaws in existing crypto tax platforms. This means platforms, like some even endorsed by the IRS. Think about that for a second. The extremely expensive tools you are supposed to use to comply with them are filled with mistakes. It’s as if the government issued you a defective map and then ticketed you when you ended up on the wrong path.

These aren't minor glitches. We’re referring to chronic under- or over-estimation from poor data collection, asset disposal practices and misclassification of transactions. In their report, DeFi Tax also discovered that mainstream exchanges will almost always produce incorrect or even conflicting 1099s. You could unexpectedly file a fraudulent income tax return. This would place you personally in the direct crosshairs of the IRS.

The root cause? Negligence. Pure and simple. In fact, some of these platforms are making billions in profits. Unsurprisingly, they have not made sufficient investments to guarantee the accuracy of their reporting. In doing so, they’ve put their desire for more data first, at your expense, taxpayer.

No One Is Accountable: Who Pays Now?

Here’s what’s most infuriating though there’s no accountability at all. According to DeFi Tax, crypto tax platforms and exchanges were uniformly resistant or nonresponsive to warnings issued about failures of accuracy. Others adjusted their algorithms quietly and secretly, without even telling their clients. These clients rely on them for unbiased, accurate information! One particularly egregious example: a large exchange updated its terms of service to bar users from participating in class action lawsuits after DeFi Tax reached out. Translation: "We know we messed up, and we don't want you to be able to sue us."

Perhaps more chilling than the event itself is the failure of federal agencies to act. Based on its research, DeFi Tax also shared their conclusions with the SEC and IRS. While officials admitted their concerns in closed-door meetings, no action publicly was taken thereafter to address the issue. They put a moratorium on crypto audits through 2023 and 2024. Perhaps they’d simply pinched the hornet’s nest they were about to upset. It's a dereliction of duty. It's like watching a house burn down and doing nothing because you don't want to get your hands dirty.

You’re handcuffed when confronted with billions of heavily-erroneous 1099-DA full year forms. There’s little incentive besides support, no defined means of correcting errors and scant accountability on the part of the issuers. This can expose you to audit, penalty and even criminal prosecution. Criminal prosecution for being misled by information from a fucked-up system.

Reclaim Your Power: Demand Real Solutions

It’s not only a story of crypto, but a larger erosion of trust across our institutions. It’s not just the DBE program, it’s more about a system that appears to be rigged to favor the powerful while harming the everyday citizen. But we don't have to accept it.

Consider things like urban gardening, or even tactical art. These are examples of people taking back control, creating something positive in their communities when the established systems fail them. We all have to bring that same spirit to play here.

It’s not only the $1.1 trillion we’ve spent in federal taxes, it’s about accountability and government transparency at all levels. It's about demanding a system that is fair, transparent, and doesn't penalize ordinary people for the mistakes of others. It’s high time we stop paying for systemic neglect and start demanding true solutions. The future of crypto — and your wallets — rests on it.

  • Contact your elected officials and demand action on this issue. Tell them that you're tired of paying the price for corporate negligence.
  • Share your stories of inaccurate crypto tax reporting. Let's amplify the voices of those who have been affected by this systemic failure.
  • Seek professional tax advice to ensure you are complying with the law. Don't rely solely on these flawed platforms.
  • Support organizations like DeFi Tax that are working to improve crypto tax reporting and provide accurate, audit-ready reports. They offer an audit defense guarantee and claim to eliminate the inaccuracies found in mainstream tax solutions.

This isn't just about your taxes; it's about holding those in power accountable. It's about demanding a system that is fair, transparent, and doesn't penalize ordinary people for the mistakes of others. It's time to stop paying for systemic negligence and start demanding real solutions. The future of crypto, and your financial well-being, depends on it.