Crypto and the IRS in Texas: Miners, Traders, and the 1099-DA Era

Texas chased the crypto industry hard, and it worked: cheap power and friendly regulation made this state the mining capital of the country. What the recruiting pitch left out is that the IRS spent those same years building its digital asset enforcement program, and the era of crypto flying under the radar is conclusively over.

Starting with the 2025 tax year, brokers and exchanges report your digital asset sales to the IRS on Form 1099-DA. The matching machine that has caught unreported stock sales for decades now sees your coins. If your past returns and your exchange history tell different stories, the gap is now visible from Washington.

The Rules in Plain English

Crypto is property, not currency, so every disposal is a taxable event: selling for dollars, trading one coin for another, spending it on anything. Each event produces gain or loss measured against your basis, and the trade-for-trade detail is what buries active traders, who can generate thousands of taxable events in a year without ever touching dollars.

Mining is different and worse. Mined coins are ordinary income at fair market value the day you receive them, and for a Texas mining operation that is self-employment income subject to the 15.3 percent self-employment tax on top of income tax. The coins then carry that value as basis for a second tax calculation when you eventually sell. Staking rewards work the same way. A miner who held everything through a price run-up can owe substantial tax on coins that have since crashed, which is exactly the kind of client who calls my office.

The Question on Your 1040 Is a Trap for the Casual

Every Form 1040 now asks, under penalty of perjury, whether you received or disposed of digital assets. Answering it falsely converts an underreporting problem into something far more serious. If past returns answered no in years with real activity, that is a problem to fix deliberately, with amended returns, not something to compound with another false answer this April.

Cleaning Up Past Years

The good news is that crypto cleanup is a known procedure. We reconstruct the transaction history from exchange exports and wallet data, compute gains with consistent basis methods, amend the affected years, and resolve any resulting balance through the ordinary toolbox: installment agreements, penalty abatement where reasonable cause exists, offers where the math supports one. Voluntary correction before the IRS initiates contact dramatically improves both the penalty posture and the negotiating room.

Losses cut the other way, and plenty of Texans have them: realized crypto losses offset gains and a slice of ordinary income, and exchange-collapse losses raise their own recovery questions worth real money.

Whether you mined it, traded it, or just answered the 1040 question wrong, the time to reconcile with the IRS is before the 1099-DA matching letters go out, not after. Let's get your history straight while it is still your move.