Crypto Cost Basis Gaps Will Trigger IRS Penalties in 2027

Investors who transfer crypto assets between exchanges risk inflated tax bills and IRS penalties starting in 2027. Centralized crypto exchanges will begin reporting cost basis information directly to the IRS agency starting that year, aligning cryptocurrency with traditional brokerage accounts. The original value of assets sold will be sent to the agency, making discrepancies between the exchange's records and personal tax filings far more visible.

Transferring crypto from an external wallet into an exchange creates a cost basis mismatch because the purchase price is not tracked. Moving crypto between crypto exchanges breaks the chain of cost basis records across platforms. Using different accounting methods—such as FIFO or HIFO—on exchanges versus tax software produces conflicting records that are difficult to reconcile.

Brokers are not required to report cost basis to the IRS for 2025, but they must now report gross proceeds from digital asset transactions via Form 1099-DA. Investors remain responsible for calculating and reconciling their adjusted cost basis across platforms.

Failure to report crypto income correctly can result in penalties of up to 75% of the correctness penalty,국의 same as 75% of the unpaid tax amount, plus interest. Criminal tax fraud can result in a fine of up to $100,000 and five years in prison.