IRS 2026 Filing Season Report: What Every Crypto Taxpayer Needs to Know
The IRS processed around 139 million individual returns during the 2026 filing season and got refunds out quickly for most people. But National Taxpayer Advocate Erin Collins made clear in her newly released report that the experience was sharply uneven: if you filed electronically and had a straightforward return, things probably went fine. If you needed human help, faced a frozen refund, dealt with identity theft, or are trying to figure out how to file crypto taxes, the season was a different story entirely. And buried in the report's list of advocacy priorities is something every crypto holder should notice: Collins specifically called for clearer processes to help taxpayers comply with digital asset reporting rules.
A Tale of Two Filing Seasons
The headline numbers look solid. The IRS processed about 139 million individual returns, with roughly 98% submitted electronically. Around 65% of those returns produced refunds, and nearly all refunds went out via direct deposit. Individual online accounts logged close to 121 million logins, and taxpayers pulled up information returns digitally more than 3.7 million times. Collins acknowledged the agency "performed better than expected in most respects," particularly given that it was simultaneously absorbing significant workforce reductions, leadership changes, and the administrative burden of implementing H.R. 1, P.L. 119-21, the legislation known as the One Big Beautiful Bill Act.
That's the good news. The rest of Collins's report is a detailed account of where the system broke down, and who got left behind.
Where things went wrong
More than 14 million individual returns were suspended during processing, flagged by IRS filters for review. Over 1 million taxpayers waited beyond the IRS's standard processing window for their refunds, with an average delay of 5.5 weeks. Phone service deteriorated: the IRS answered just 21% of the 48.1 million calls it received, down from 25% the prior year. Average hold times climbed to 14 minutes, up from eight minutes the previous season. Collins described the experience for affected taxpayers as "frustrating, confusing, and financially disruptive," and that description is understated for those dealing with identity theft.
Identity theft cases are where Collins uses her sharpest language. She called the delays "unconscionable." Victims are waiting close to two years, on average, to resolve cases and receive their refunds. More than half a million such cases remained open at the end of the filing season. That's not a rounding error. It's a population of real people, many of them in financial hardship, waiting on money that is legally theirs.
What the Report Means If You Hold Crypto
Digital asset reporting has been steadily moving up the IRS's priority list, and this report confirms it hasn't moved down. Collins explicitly listed making it easier for taxpayers to comply with digital asset reporting rules as one of her 11 advocacy priorities for the coming year. That single line carries a lot of weight.
The digital asset reporting question on your return
Every individual filer must answer the digital asset question at the top of Form 1040. Getting that question wrong, or failing to report taxable crypto transactions accurately, is a compliance risk that sits independently of whether your overall return is simple or complex. The IRS has been building out its capacity to cross-reference on-chain data, broker reporting, and third-party information returns. The fact that the Advocate is now recommending the IRS make digital asset compliance easier for taxpayers suggests both that the current process is confusing and that the agency is being pushed to do more to guide filers rather than simply enforce against them.
Why a crypto tax calculator matters more this year
The 2026 filing season data points to a clear pattern: taxpayers who arrive at the filing stage with everything organised digitally move through the process quickly. Those who don't are waiting weeks, sometimes months, for resolution. For crypto holders, that distinction starts long before April. Using a reliable crypto tax calculator to reconcile your transactions, apply the correct cost basis method, and generate an accurate crypto tax report before you file is the difference between being in the 98% who sail through and the group waiting 5.5 weeks for a frozen refund to thaw.
This matters especially because crypto returns are disproportionately likely to trigger IRS filters. Any discrepancy between what you report and what a broker or exchange has already sent to the IRS on a Form 1099-DA can cause your return to be suspended for review. Getting your numbers right the first time, with documentation to back them up, is the most practical thing you can do to stay in the fast lane Collins describes. You can read more about how the IRS is expanding its audit targets for crypto filers in our earlier coverage.
Paper Checks, Bank Access, and Who Gets Left Behind
Collins's report raised a concern that may seem distant from crypto but connects to it in practice: some taxpayers, particularly those without bank accounts or reliable internet access, struggled to receive paper checks when direct deposit wasn't an option. The IRS's push toward electronic payments is logical at scale, but it creates real friction for people who are unbanked or underbanked.
For crypto holders specifically, this is a reminder that the IRS's digital infrastructure, while improving, still has gaps. If your refund is delayed because your return is flagged, and you need to correspond with the IRS to resolve it, you're entering the part of the system where wait times are long and resolution timelines are measured in weeks, not days. That's all the more reason to file a clean, accurate return from the start.
The 11 Advocacy Priorities and What They Signal
Collins outlined 11 priorities for the year ahead. Beyond digital asset compliance, these include reducing identity theft case delays, improving paper check processes, and enhancing online account functionality for tax practitioners. The IRS agreed to implement 47 of the 64 administrative recommendations from Collins's 2025 annual report, either fully or in part. That's a meaningful acceptance rate, and it suggests the agency is responsive to the Advocate's findings even when it can't act on everything at once.
What digital asset compliance simplification could look like
Collins didn't specify in this report exactly what "making it easier to comply with digital asset reporting rules" should look like in practice. But the direction of travel is clear from the broader regulatory context. Broker reporting rules under the Infrastructure Investment and Jobs Act have been rolling out in stages. The Form 1099-DA is now in use for certain transactions. As more exchanges issue these forms, the IRS will have more data to compare against what taxpayers self-report. Simplification, from a taxpayer's perspective, likely means clearer IRS guidance on cost basis methods, wash sale treatment for crypto (still unresolved in statute), and how to handle DeFi transactions that don't generate any third-party form at all.
For now, the burden of accurate reporting still falls largely on you as the taxpayer. That means tracking every taxable event, including trades, staking rewards, airdrops, and payments received in crypto, and calculating your gains and losses correctly before you file. A crypto capital gains calculator that integrates with your exchange history is the most reliable way to do that at scale. You may also want to review what the IRS gift tax safe harbor means for Trump Account contributions if you're planning any crypto-related gifting this year.
Practical Steps for Crypto Filers Right Now
The 2026 filing season is over, but planning for 2027 starts now. A few things worth doing before the year is out:
Organise your transaction history
Don't wait until next spring to pull your exchange records. Download your transaction history from every platform you used this year, including any DeFi protocols, and reconcile it now. Gaps are easier to fill when the activity is recent.
Check for 1099-DA discrepancies
If your exchange issued a Form 1099-DA, compare it against your own records. Errors on these forms happen, and you're responsible for what goes on your return, not what the form says. If there's a discrepancy, document your reasoning and keep it.
Understand your cost basis method
The IRS requires consistent application of your chosen cost basis method. FIFO is the default if you haven't made a specific identification election. Know which method you're using and make sure your crypto tax report reflects it accurately.
Don't ignore the digital asset question
That checkbox at the top of Form 1040 is not optional and not a technicality. If you received, sold, exchanged, or otherwise disposed of digital assets during the year, you need to answer it honestly and report the underlying transactions on Schedule D and Form 8949.
The IRS's 2026 filing season showed that the agency can handle volume efficiently when filers do their part. The Advocate's report is a clear signal that digital asset compliance is a growing focus. Getting your numbers right with a trusted crypto tax calculator before you file is the single most effective step you can take to avoid being one of the millions whose returns end up in review.
Source: Journal of Accountancy
Frequently Asked Questions
Does the National Taxpayer Advocate report have any direct effect on my crypto tax obligations?
Not directly. The report is an independent assessment by the Advocate's office and does not change tax law or IRS rules. But it does signal where the IRS is being pushed to focus, and digital asset reporting compliance is explicitly listed as an advocacy priority for the coming year. That's a meaningful indicator of where the agency's attention is heading.
Why might a crypto return be more likely to get flagged for review?
IRS filters look for mismatches between what you report and what third parties have already sent to the agency. If your exchange filed a Form 1099-DA showing proceeds from crypto sales and your return doesn't reflect those figures consistently, the discrepancy can trigger a suspension. Accurate reporting, backed up with your own transaction records, reduces that risk significantly.
What is Form 1099-DA and do all exchanges issue it?
Form 1099-DA is the IRS information return that certain digital asset brokers are required to file, reporting proceeds from crypto disposals to both the IRS and the taxpayer. Not all platforms are subject to the current rules, particularly decentralised exchanges and some foreign platforms, which means many crypto transactions still require self-reporting without a corresponding form.
Can I still use FIFO for my crypto cost basis in 2026?
FIFO (first in, first out) remains a permitted cost basis method, and it's the IRS default if you haven't made a specific identification election. You can use other methods, but you need to apply them consistently and keep records that support your calculations. Your crypto tax report should clearly document which method you used.
What should I do if my refund was delayed or my return was flagged this year?
Check your IRS online account for any notices or requests for additional information. If your return was suspended, the IRS will typically send a letter explaining what it needs. Respond promptly and keep copies of everything you send. If you're dealing with an identity theft case, the Taxpayer Advocate Service can assist when normal IRS channels are not resolving your case within a reasonable time.