Demystifying Tax Extensions for US Taxpayers Struggling with the Release of the 1099-DA

The release of the 1099-DA has created chaos for both exchanges and US investors alike. We are still hearing from clients that their 1099-DA has not arrived, and feelings of both panic and frustration are setting in. During this process, we have found that many clients are wary of filing extensions, and others have asked whether they should just file their tax return without the 1099-DA information and amend it at a later date.

I thought I would provide some clarification to those in this position:

Filing a tax extension (giving you until October 15th to file) is a frequent and normal approach to filing your taxes. Extending is often done because it gives taxpayers the time needed to file a complete and accurate return rather than rushing to meet the deadline.  Filing a tax return on extension does not create additional scrutiny from the IRS or result in delays in receiving refunds. Additionally, most CPAs are happy to extend tax returns for free, and DIY software such as TurboTax or TaxAct offer free extensions as part of their service. The extension filings only take a few minutes to submit.

By contrast, filing by April 15th with incomplete or uncertain information leads to mistakes that require an amended return, which adds complexity (more CPA fees), takes months for the IRS to process, and could increase the likelihood of IRS audits or follow-up questions.  Amending is meant to be used only in circumstances where you make a legitimate mistake in filing your taxes that is material enough to necessitate filing again. 

Please note that extending a tax return is an extension of time to file.  It is not an extension to pay your tax liability.  Therefore, if you believe you owe taxes with your 2025 tax return, you should consider making an estimated payment by April 15th to avoid underpayment charges, which are ~7% annual interest fees that accumulate between April 15th and the time you actually pay your tax liability for the year.

TLDR:

1. Don't panic, and consider extending your return as an option to give you more time to sort out your crypto taxes this year.
2. Do not file an incomplete tax return because you don't have the data you need.
3. Make tax payments with your extension if you think you have not paid your tax liability for the year. Overpayments will be promptly refunded back to you when you file your return.