A new rule on how you track and report your crypto investments reflects the tax agency’s increasing focus on digital assets.

If you’re one of the 65 million Americans who own cryptocurrency, it’s time to update how you track your investments.

The IRS has introduced a new form and rule this year that changes how crypto investors report profits and losses from trading virtual currency.

It’s the latest sign of the IRS’ intensifying focus on cryptocurrency, which has surged in popularity and presents unique challenges for tax authorities and regulators.

“With the IRS paying closer attention to crypto assets, it’s essential for those who invest in or use virtual currency to keep careful records to avoid the risk of an audit.

The IRS treats cryptocurrency similarly to stocks, bonds, and other capital assets. If you earn, buy, sell, trade, or spend cryptocurrency, you may owe taxes on the transaction, depending on the cost basis—or original value—of the crypto asset. Accurate tracking and reporting of these transactions is required on your tax return.

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Crypto investors typically manage their digital assets through electronic “wallets,” and may hold several wallets across multiple exchanges—the platforms used to buy and sell cryptocurrency.

Previously, all digital assets from all wallets and exchanges were combined into a single pool for tax-reporting purposes. But under a new IRS rule effective January 1, 2025, crypto holders must calculate and report profits and losses for each individual wallet rather than aggregating them.

Wallet-based tracking should ultimately make it easier for crypto investors to file taxes. Two persistent challenges have been the accurate reporting of ordinary income and organizing data from multiple exchanges. The new system provides a more precise view of transactions and better aligns with how exchanges report activity to the IRS.

Still, some investors may encounter added complexity, including a more involved reporting process and limited flexibility in selecting tax lots (records of asset acquisitions used to calculate gains and losses).

As crypto’s popularity has grown, so has IRS oversight. Starting with the 2025 tax year, detailed cryptocurrency transactions must be reported on a new form: 1099-DA. These forms are expected to be issued in 2026.