Coinbase’s 2026 Crypto Tax Readiness Report found that a large share of its users still do not understand core tax rules, even as new IRS reporting standards take effect. The report suggests that basic confusion around taxable events is now colliding with a more formal reporting regime, increasing the risk of mismatches between what exchanges report and what taxpayers file.

That problem is becoming more consequential because brokers began reporting gross proceeds on Form 1099-DA for the 2025 tax year. The new framework creates a direct comparison point between exchange-reported activity and taxpayer filings, making errors in cost basis and transaction classification much more visible to the IRS.

Basic tax awareness remains weaker than many investors assume

According to the report, only 49% of surveyed investors correctly identified that selling, exchanging or using crypto for purchases is a taxable event. That means a majority of users either misunderstood or were unsure about one of the most basic rules in crypto taxation.

The findings also show a gap between general awareness and actual functional knowledge. While 74% of respondents said they understood that crypto activity is taxable in principle, far fewer demonstrated a working grasp of what specific actions actually trigger tax consequences.

Confusion extends beyond taxable events into the reporting changes now coming into force. The report found that roughly 61% to 66% of U.S. crypto investors were unaware of recent IRS updates, including the introduction of Form 1099-DA.

Cost basis remains the biggest operational weakness

Coinbase’s report makes clear that the central reporting problem is not gross proceeds, but basis reconstruction. Because brokers now report gross proceeds while taxpayers must supply purchase history, fees and cost basis, the burden of accuracy falls heavily on users who often do not have complete records.

That burden is compounded by fragmented account activity. Users reported holding assets across an average of 2.5 platforms or wallets, while 83% said they use self-custodial wallets, making tax reconciliation significantly harder across disconnected systems.

The report says 60% of Coinbase customers do not have complete cost basis records, and only 35% have ever adjusted cost basis entries. That combination creates a setting where many investors may end up overstating gains simply because they cannot fully reconstruct what they originally paid.

Coinbase and CoinTracker both framed the issue as a practical reporting challenge rather than a theoretical one. The report warns that when exchange data reaches the IRS without matching cost basis information from the taxpayer, automated systems may generate notices that propose additional tax, interest and penalties.

That risk becomes more serious when users rely on incomplete records or manual estimates. The report points to IRS tools such as the Automated Underreporter system and CP2000 notices as mechanisms that can turn basic recordkeeping gaps into formal enforcement problems.

The report’s broader conclusion is that tax friction is becoming an adoption issue as much as a compliance issue. Unless recordkeeping, cost basis interoperability and educational tools improve quickly, reporting complexity could discourage participation and create avoidable exposure for everyday users.