Web3 founders of Web3 figured crypto tax would probably emerge as an important issue they needed to address. All token sales together with airdrops or other crypto transactions within a system may trigger taxable transactions.
The new IRS Form 1099-DA together with other regulations demonstrates that tax authorities are now tracking on-chain activities. Starting from 2025 brokers will be required to transmit digital asset transaction records directly to the Internal Revenue Service (IRS).
Your web3 project must incorporate tax into its core strategy because neglecting this aspect could lead to tax audits as well as penalties and loss of investor trust. This guide provides information about taxable items along with necessary steps for Web3 teams to take with appropriate strategy and advisory services.
Why Crypto Tax Matters for Web3 Founders
Web3 founders need to treat crypto tax as more than just a legal requirement because it presents business risks to their operations. All significant crypto transactions including token launches, crypto airdrops, NFT sales, crypto payments, and all that now trigger tax requirements for users. These major events in your Web3 operations create tax obligations that can affect your treasury funds, team member wallets, community incentive programs, or exchange listings.
Most Web3 projects require token sales along with incentive-based participation models to expand their operations and grow. If there’s no clear tax rules regarding those activities, it would result in penalties or funding delays. In some cases, if a project is unable to fulfill their tax obligations, it may prevent the token from getting an exchange listing.
Global regulators are also increasing scrutiny. Tax rules are expanding to cover cross-border blockchain activity. As a result, investors, partners, and compliance teams are paying more attention to how projects handle reporting. Because of all that, crypto tax is now part of building a credible and fundable Web3 business.
What Is IRS Form 1099-DA and Why It Affects Your Token Launch
The United States crypto activity comes under direct tax reporting requirements through Form 1099-DA. The IRS requires brokers to submit reports about digital asset transactions beginning January 1, 2025. The tax reporting rule affects centralized exchanges as well as wallet providers and other platforms that enable trades.
If your Web3 project includes activities such as selling tokens or moving assets through a broker, the team will need to report all such transactions through the form provided. The form includes key details such as wallet address, transaction amount, asset type, and customer identity.
Due to these changes, Web3 founders will need to pay attention and re-structure the way token launches and treasury transactions are handled, adapting to these crypto tax rules. Anything from a public sale, liquidity event, or reward distribution can trigger a report, so they need to be re-structured.
Not filing tax reports together with neglecting broker filings may result in audit investigations and financial penalties and extended compliance difficulties. The Internal Revenue Service may investigate transfers made within your wallet when such actions occur through a registered broker platform.
Read also: 2025 Crypto Compliance
Taxable Events Every Web3 Project Must Track
Most Web3 projects fail to recognize that Web3 businesses generate taxable events during regular operations. The creation of tax obligations extends beyond major token launches because standard business operations can trigger these obligations. Several activities within Web3 businesses may trigger taxable events according to the following list:
Token launches and presales
Selling tokens to raise funds or manage your treasury is usually treated as a capital gain or income event. The tax treatment for token sales revenue depends on both the jurisdictional rules and the sale structure which determines whether it will be considered taxable income or capital gain.
Airdrops and community rewards
Any distribution of tokens, even for free purposes might qualify as recipient income. Projects need to follow jurisdictional reporting requirements for this situation.
Staking rewards and liquidity incentives
Tokens received from staking activities, farming, or incentive programs become taxable income at the moment users claim them.
NFT minting and sales
The classification of NFT minting revenue together with NFT sales proceeds falls under business income or capital gains.
Liquidity provision and swaps
Providing assets to a DEX pool or swapping one token for another can be a taxable disposal event.
DAO treasury activity and contributor payments
Treasury grants together with payroll in tokens and operational spend become subject to tax exposure based on their classification.
Internal wallet transfers
The transfer of tokens between wallets needs to be tracked specifically for custodial or business wallets to preserve cost basis consistency.
Why Crypto Isn't The Same as Accounting
Tax reporting requires more than just seeing what went in and out. It requires knowing why it happened, what the token was worth, and how it should be classified. Without this information:
You can’t calculate gains or losses correctly
You may double-count or miss internal transfers
You risk misreporting taxable income
For example, the process of claiming staking rewards followed by their transfer to another wallet appears as two separate transactions in the records. Your reports will become inaccurate and may get flagged when you fail to perform proper reconciliation.
The wallet tools provide helpful features yet they lack the necessary capabilities for accounting tasks. Founders require systems to document transaction purposes alongside their fiat asset values and the exact execution times. To file taxes successfully and avoid audits, founders must provide this level of documentation detail.
Reconcile On-Chain Activity for Tax Compliance
Reconciling on-chain activity is one of the most important steps in crypto tax reporting. However, it is also one of the most misunderstood. Beyond wallet transaction history and accounting standards, web3 founders need to pay attention to every on-chain event and it should be paired with the following three things:
Cost basis: What was the original value of the asset when acquired?
Timestamp: When did the transaction occur, down to the minute?
Purpose: Why did the transaction happen (payment, reward, airdrop, etc.)?
This is especially critical for transfers across wallets, swaps, or smart contract interactions. Without reconciling these correctly, you may underreport gains or double-count income.
Once this context is captured, the data must be converted to fiat value at the time of the event. Only then can a proper tax report be generated. Crypto accounting tools can help, but they must support tagging, valuation, and integration with fiat-based systems. Founders should also consider periodic internal reviews and external validation for critical treasury reports.
Tax Strategy Checklist for Web3 Businesses
Set up a legal entity before launch
A legal entity formation preceding launch allows you to determine your legal jurisdiction and to establish tax status and maintain business financial separation from personal funds.Track every on-chain transaction with purpose and price
Note down all the events behind the transaction together with its date of occurrence and its value converted in fiat currency.Plan token sales and airdrops in advance
Launch events frequently generate tax responsibilities. Schedule these events in advance and document their treatment rules for each distribution.Review your data periodically
Internal audits or external advisors should review your data before tax filing begins. Detecting errors during early stages minimizes the level of audit risk.Work with a crypto-focused legal or tax advisor
Every jurisdiction is different. A professional advisor will help you maintain a strategy that passes all tests during examination
Build Smart Token Strategies with Compliance in Mind
Every Web3 project requires proper planning and strategy, including the crypto tax to become successful. From token launches to airdrops, your current operational approach determines future compliance status.
At TokenMinds, we help founders build a stronger web3 project foundation. We can guide projects from token sales strategy and treasury design to smart contract development and on-chain operations. While we don't offer tax services directly, we can help you with token strategies and other blockchain development.
Start your Web3 project on the right track. Let’s discuss and schedule a free consultation with us now.
