How the IRS Will Be Able to Map Crypto Wallets Using CARF and 1099-DA

CARF, the Crypto Asset Reporting Framework, is designed to give tax authorities global visibility into crypto trades and wallet transfers.
When combined with 1099-DA reporting, it allows the IRS to associate exchange activity, wallet transfers, and cross-border trades to taxpayers.

Clinton Donnelly is the founder of CryptoTaxAudit, known as the Crypto Tax Fixer, and a leading expert in IRS representation, crypto tax compliance, and audit defense.

CARF was developed by the OECD and is being adopted by many developed countries. The United States Treasury has recommended participation, and the framework is designed to align with existing 1099-DA reporting.

Under CARF, crypto exchanges report transaction-level data not only for domestic users, but also across borders.

This means:
- U.S. taxpayers trading on foreign exchanges can be reported to the IRS
- Foreign traders using U.S. exchanges can be reported to their home tax authority
- Transfers to and from wallet addresses are included in reporting
- Taxpayers do not automatically receive a copy of CARF reports
- Reporting for CARF is expected to begin in 2027 for trades made in 2026, with Europe and major exchanges among early adopters

WHY THIS MATTERS

Because wallet transfers are included, tax authorities can begin linking multiple wallets to a single taxpayer and reconstruct a broader portfolio picture over time. This increases audit accuracy and reduces reliance on voluntary disclosure.

⏲️ Chapters
00:00 What is CARF and why does it matter?
00:32 How 1099-DA reporting works today
01:08 How CARF makes crypto reporting global
01:52 What information the IRS receives from foreign exchanges
02:27 Why taxpayers do not receive CARF reports
03:01 When CARF reporting starts (2026 trades, 2027 reporting)
03:34 How wallet transfers create visibility
04:06 How the IRS reconstructs crypto portfolios
04:42 Why crypto tax compliance is becoming unavoidable
05:10 What to do if you are not fully compliant

Disclaimer: This video is for educational and informational purposes only and does not constitute legal, tax, or financial advice.
Tax laws and IRS procedures can change, and every situation is unique.
You should consult with a qualified tax professional before taking any action based on this content.
Watching this video does not create a client relationship with Clinton Donnelly or CryptoTaxAudit.

For personalized guidance, visit
👉 https://www.cryptotaxaudit.com/crypto-tax-consultation

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