Do crypto apps report to the IRS?

What an app for crypto trading is and why IRS reporting can matter

An app for crypto trading usually means software that lets you buy, sell, or hold digital assets. In many cases the app stores assets or executes trades on your behalf, which can change how tax reporting works for those transactions, and it is helpful to know which type you are using early when you prepare records.

Custodial trading apps hold assets and may control private keys, while noncustodial wallets give you sole control of keys and signing. That custody difference matters because U.S. guidance treats many centralized custodial platforms like brokers that commonly issue IRS reporting documents to customers, including 1099-style forms in some cases IRS virtual-currency FAQs.

Even if an app does not send a platform 1099 you still have the responsibility to report taxable crypto events on your return. Lack of a platform report does not remove your reporting duty, so keeping transaction details is important whether you use a custodial app or a wallet.

Definition: custodial trading apps vs noncustodial wallets (app for crypto trading)

Use simple labels to sort your situation. A custodial trading app holds assets for you, may execute buys and sells on its system, and often provides account statements. A noncustodial wallet is software or hardware that lets you hold keys and move assets without a third party taking custody. These categories help predict whether the platform will provide tax statements.

For practical tax work the difference is that custodial services commonly act as reporters to the IRS, while pure noncustodial tools usually do not provide platform 1099s because they do not custody assets or execute trades for customers IRS virtual-currency FAQs.

How the IRS distinguishes brokers, custodians and wallets

The IRS has guidance that focuses on who effects trades and who holds customer assets. Platforms that custody assets or execute trades are treated as the primary sources of information returns, because they have access to transaction details that help match taxpayer filings to third-party data IRS virtual-currency FAQs. See final regulations and related IRS guidance for additional context.

Noncustodial wallets and peer-to-peer transfers generally do not create platform-level 1099s, since a provider that only supplies software and does not take custody or execute trades lacks the same reporting role. That said the IRS and other agencies have been updating guidance and reporting concepts, so some implementation details have evolved recently Draft 1099-DA instructions.

The practical consequence is that custody and trade execution are the key factors that change reporting responsibility. If you are unsure about your app look for terms about custody and whether the provider executes trades on your behalf, and treat those features as signals for broker-like reporting obligations FinCEN guidance on convertible virtual currency.

When an app for crypto trading will likely report to the IRS

Apps are more likely to report to the IRS when they hold customer funds, provide custody services, or execute trades on an internal matching engine. Typical broker-like functions include maintaining custody of private keys for customers, offering in-app trading that the platform settles, and issuing account statements that list trades and balances.

Common product features that increase the chance of platform reporting include trade execution services, hosted custodial wallets, and in-app fiat on ramps. Services that only provide software for you to sign transactions locally, or that only relay peer-to-peer messages, often do not issue 1099-style reports, though this area has seen new reporting concepts introduced in recent years Draft 1099-DA instructions.

There are edge cases where an app offers hybrid features, for example custody for some assets but user-controlled wallets for others. Those hybrid arrangements can make reporting less predictable for customers, and some platforms have adopted different reporting practices by product or jurisdiction to match evolving guidance Deloitte guidance on cryptocurrency tax reporting.

Which tax forms you may receive from an app: 1099-K, 1099-B and the 1099-DA concept

Different 1099 forms report different information and affect how you reconcile gains and losses. Form 1099-K is a payment-processor style report that often shows gross proceeds or transaction totals. Broker-style forms like 1099-B or the proposed 1099-DA are intended to report proceeds alongside cost basis and gain or loss, which can simplify filing when available Tax Foundation overview of 1099-K and 1099-B. See Understanding your Form 1099-DA for more on the new form.

Historically 1099-K created challenges because it reports gross amounts and had thresholds that did not match typical trading volume for many crypto users. Broker-style reporting aims to reduce that friction by supplying cost-basis details, and the IRS has published draft concepts that point in that direction while some details remain under development Draft 1099-DA instructions.

For taxpayers the important result is that receiving a broker-style form can ease reconciliation, but you should still export raw transaction history and confirm how the platform calculated basis and proceeds before relying on a single form.

How to check whether your app will produce IRS reports

Start inside the app, in account settings or help pages labeled tax, statements, or reports. Many custodial platforms provide a tax or reports section where you can download a 1099 or a tax statement, and help centers often describe what forms the platform issues and how to download them Example platform help center tax guide.

Look for language about tax reporting, 1099s, tax statements, or downloadable reports. If you find a tax center, download both the platform 1099 and a full transaction export that includes timestamps, transaction IDs, and acquisition details where available.

If your app does not show a tax center, check the terms of service and custody language. If the provider clearly states it does not custody assets or that users control private keys, you are more likely to need to gather transaction data yourself rather than rely on a platform 1099 IRS virtual-currency FAQs.

If your app does not send a 1099: what you still must report

A platform failing to send a 1099 does not remove your tax reporting requirements. The IRS expects taxpayers to report sales, dispositions, and income from virtual currency even when third parties do not provide information returns, and taxpayers remain responsible for correct reporting and recordkeeping IRS virtual-currency FAQs.

Enforcement tools such as information-return matching and third-party summonses mean unreported activity can surface even without a platform 1099. That is why keeping accurate transaction records and supporting documents reduces audit risk and helps you respond to inquiries if they arise FinCEN guidance.

To protect yourself export raw history, document acquisition costs, and keep copies of deposits and withdrawals. Consistent cost-basis methods and clear timestamps make reconciliations far simpler if the IRS questions your return.

A practical checklist: download, export, reconcile and keep records

Start with three core files from any custodial app: the platform 1099 or tax statement if provided, a complete transaction export with timestamps and transaction IDs, and deposit and withdrawal logs that show movement into and out of the account. These are the backbone of an audit-ready file set Platform tax export guidance.

Next, compute cost basis consistently. Choose a defensible method such as FIFO or specific identification when supported, and apply it uniformly across all assets to avoid mismatches. If you do not receive a platform cost-basis figure reconcile proceeds against your own calculations to confirm totals.

Keep records for several years, ideally in multiple backups. Store CSV or raw export files, snapshots of platform tax statements, and any correspondence that shows how the platform reported transactions. Those files make it easier to correct errors or answer IRS follow-ups.

Common mistakes and documentation pitfalls to avoid

Mismatched cost basis is a frequent problem, often caused by transfers between accounts or wallets that platforms treat differently. When you move assets between your own accounts note the transfers, because treating a wallet-to-wallet move as a sale changes reported gains incorrectly IRS virtual-currency FAQs.

Relying solely on a single platform report can also cause issues. A 1099-K shows gross proceeds and may not reflect basis adjustments. Always compare platform forms to your raw export and reconcile any differences before filing Tax Foundation on form differences.

Simple fixes include exporting raw CSVs, noting acquisition dates and costs, and documenting internal transfers. When in doubt keep extra files rather than fewer, because more documentation usually helps resolve discrepancies faster.

Real-world scenarios: centralized exchanges, custodial apps, and noncustodial wallets

Scenario B: If you use a noncustodial wallet and only occasionally transfer to an exchange to trade, the noncustodial provider will usually not issue a platform 1099 for wallet-to-wallet moves. You must track acquisition costs and report sales that occur when you trade on an the exchange, and the exchange may provide a report for trades executed there IRS virtual-currency FAQs.

Hybrid cases, where you hold some funds in a custodial app and some in a personal wallet, are common. In hybrid use keep clear notes on which side of the split held custody at each point, because that helps show whether the platform should have been the source of a 1099 and supports your filing position.

Special cases: staking rewards, airdrops, DeFi and peer-to-peer transactions

Staking rewards, airdrops, and certain DeFi activities can create taxable income or adjust your cost basis even if they are not sales. Many platforms do not systematically report these events, so taxpayers should track receipt dates, fair market values at receipt, and any subsequent disposals Deloitte on crypto tax reporting considerations.

For peer-to-peer transactions, the absence of a platform 1099 is common because no custodian executed a trade. Still you may have income or capital events to report. Keep clear records that document the nature of each transfer and any value exchanged to support your return.

How enforcement and information reporting work and what that means for you

The IRS uses information-return matching to compare third-party reports with taxpayer filings, and it can issue third-party summonses to gather additional records where needed. This means that even if an app did not issue a 1099, matching and data requests can reveal unreported activity IRS virtual-currency FAQs.

FinCEN and other agencies also provide guidance about recordkeeping and AML obligations that can lead to information sharing in enforcement contexts. Good documentation reduces friction if the IRS or another agency requests backup files for review FinCEN guidance.

If you receive a notice respond with organized exports and a simple timeline of events. Where records are incomplete a tax professional can advise on corrective filings or how to provide reasonable support for reported amounts.

When to get professional tax help and what to bring to an appointment

Consider professional help if you have high trading volume, extensive DeFi or staking activity, large airdrops, or if your platform reports and your own exports disagree. A tax pro can help reconcile differences and recommend how to correct prior filings if needed Platform tax reporting help.

Bring a compact packet of documents: exported transaction history with timestamps, platform 1099s or tax statements, deposit and withdrawal logs, and notes on how you calculated cost basis. Clear, labeled files save time and help your adviser provide focused guidance.

For many everyday users a single session to verify records and confirm a cost-basis method is enough to reduce filing risk. Use a pro when the history is complex or when potential adjustments could affect large sums.

Short checklist for filing season: quick reconciliation steps

Three quick actions before you file: gather all platform 1099s and tax statements, export full transaction history with timestamps, and reconcile your gains and losses using a consistent cost-basis approach. These steps reduce last-minute surprises and make filing smoother Deloitte reporting checklist.

After you e-file check that totals on your return align with aggregated figures from platform reports and your reconciled worksheet. Save backups of all files and confirmations of your e-file submission in case you need to respond to questions later Tax Foundation on reconciliation.

Bottom line: practical next steps for users of crypto apps

First actions are straightforward: check any platform 1099s, export your full transaction history with timestamps, and reconcile cost basis before filing. These steps help you meet tax responsibilities even as reporting rules evolve IRS virtual-currency FAQs.

Guidance and reporting instruments continue to develop, so check IRS resources, our crypto category, and your platform help center for updates each filing season. When histories are complex seek professional help and keep organized backups for several years.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.