As millions of Americans receive their first crypto tax forms under the IRS’s new 1099-DA reporting system, an analysis from crypto tax software provider Summ shows the average crypto investor faces $14,500 in overstated capital gains due to incomplete cost basis tracking across platforms.
The analysis of 30,000 U.S. users with moderate trading activity found $435 million in inflated capital gains for the 2025 tax year alone—a 944% overstatement compared to actual gains of $46 million. The gap stems from a fundamental flaw in how digital asset transactions are reported: when investors buy crypto on one platform and sell on another, the cost basis information doesn’t follow, Summ says.
“The Form 1099-DA was designed to bring transparency to crypto taxation, but it’s creating a new problem,” Shane Brunette, founder and CEO of Summ, said in a statement on March 2. “These forms only capture part of the picture; typically just the sale. Without the purchase history from other platforms, the IRS sees proceeds with zero cost basis, which looks like pure profit on paper.”
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The fragmentation impact on taxpayers
The Summ analysis reveals how platform fragmentation drives reporting gaps:
- The average user connects four data sources to reconcile their crypto activity.
- Only one of those four is a reporting platform that issues 1099-DAs.
- 57% of all transactions occurred outside reporting platforms.
- This means the typical user has three sources that won’t generate a 1099-DA.
Summ provides this scenario: An investor buys Bitcoin through a decentralized exchange or self-custodial wallet (non-reporting platforms), then later sells it on Coinbase or Kraken (reporting platforms). The receiving exchange has no record of the original purchase price. The 1099-DA reports the proceeds but lists cost basis as zero. To the IRS, that’s 100% taxable gain.
“You could have bought that Bitcoin for $50,000 and sold it for $52,000, a $2,000 gain,” Brunette explained. “But if the purchase happened off-platform, the 1099-DA makes it look like you gained $52,000. That’s a $50,000 difference you’ll need to explain to the IRS.”
The burden of proof
Without comprehensive transaction tracking across all platforms, taxpayers face two challenges, according to Summ:
- Reconstruction: Manually piecing together transaction history from multiple platforms, wallets, and protocols—some of which may no longer exist or maintain records.
- Substantiation: Providing documentation to the IRS explaining why their calculated gains differ from what appears on 1099-DA forms.
The timing makes this particularly urgent, the company says. With 1099-DA forms arriving now, investors have limited time to reconcile potentially years of cross-platform activity.
The $435 million captured in Summ’s analysis represents just one transaction pattern. The study didn’t account for other common crypto transactions like wallet-to-wallet transfer between self-custody solutions, non-fungible token transactions, cross-chain bridges and swaps, crypto earned as income, and more.
Each of these transactions creates additional cost basis gaps. Extrapolated across the estimated 46 million U.S. crypto investors, the collective impact could exceed $600 billion in overstated gains, though actual individual impacts will vary significantly based on trading patterns, Summ says.
For investors, the message is clear: Don’t rely solely on 1099-DA forms.
“Your actual tax liability likely bears no resemblance to what those forms suggest,” Brunette said. “The only way to report accurately is to aggregate your complete transaction history across every platform you’ve used.”
Data methodology
Summ analyzed a random sample of 30,000 U.S. users with moderate trading activity (1,000 to 50,000 transactions) for the 2025 tax year. The study specifically examined scenarios where users purchased crypto on non-reporting platforms and sold on reporting platforms, resulting in 1099-DAs with zero cost basis. Actual capital gains totaled $46 million across the cohort, while 1099-DA forms would report $481 million, creating a $435 million gap in inflated gains, an average of $14,500 per user. All amounts in USD.
Photo credit: pcess609/iStock
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