I came across a fan's complaint this morning: "In the past, arbitrage was about earning the spread; now it's about burying myself under tax traps." I chuckled for a bit, then started to feel sorry.

Honestly, since the IRS's new crypto tax regulations took effect this year, the ones suffering the most aren't beginners, but seasoned players who are adept at moving between multiple platforms and frequently shifting assets between self-custody wallets. Why? Because the rules have changed.

Let's break down each pitfall of this new regulation one by one, so everyone won't regret later.

**First Pitfall: Official Tax Forms "Disappear"**

In the 2026 tax season, the forms you receive will honestly tell you how much you sold. But key information like your purchase costs and transaction fees? Don't count on it. The IRS's logic is blunt—if they can't find the data, they assume your cost basis is zero, and the taxes you owe skyrocket. Just this one point can make many people question their sanity by having to pay back taxes.

**Second Pitfall: Cost Calculation Shifts from "General Ledger" to "Separate Accounts"**

Starting this year, the IRS requires you to account separately for each exchange account and wallet. What does this mean? If you sell one coin on Platform A, you can only use the purchase cost recorded on Platform A to calculate gains or losses. Even if you have a lower-cost purchase record in Wallet B, sorry, you can't use it. For those used to moving assets across multiple platforms and frequently transferring tokens, this is a nightmare. Previously, a single ledger covered everything; now, each account and wallet must have its own record. Just organizing these records can take ages.

**Third Pitfall: Automated Audits, No Mercy**

The IRS system is now highly automated. Your transaction data reported by exchanges and your tax filings are automatically cross-checked. If there's any mismatch, a red flag is raised immediately. This isn't manual review—no room for negotiation—the system automatically flags issues.

In the past, manual operations allowed some flexibility, but now the rules are clear—just follow them.

So, the only advice now is: get your transaction records in order early. Whether it's exchange transactions, wallet transfers, or DeFi operations, everything must be documented. This new regulation isn't scare tactics; it must be taken seriously.