From 1 January, your exchange can hold back 24% of what you sell — not 24% of what you make.
Backup withholding on digital-asset sales has been switched off for 2025 and 2026 by IRS Notice 2025-33. That relief ends on 31 December 2026. From 1 January 2027, a broker paying you for a sale must withhold 24% unless you have given them a certified taxpayer identification number — on a Form W-9, signed.
The number that matters is which figure the 24% comes off. It is the payment, not the profit. Sell $50,000 of bitcoin that cost you $48,000 and the withholding is $12,000 against roughly $480 of actual tax — the difference is your money, parked with the Treasury until you file and claim it back.
The fix takes ten minutes and costs nothing: make sure every broker you use holds a current, certified W-9 for you. That is it. This page shows what the exposure would be if you do not, and exactly what "certified" means. It is information, not advice. ClearBasis is tax software — not a law firm, accounting firm or tax preparer.
What it would cost you
Two figures, both yours. We never guess a bracket.
What "certified" actually means
| Situation | 2027 outcome | What to do | Urgency |
|---|---|---|---|
| You gave the broker a signed W-9 and the name and TIN match IRS records | No backup withholding | Nothing — but check it is on file and current | clear |
| The broker has a TIN but you never certified it | Depends: for accounts opened before 1 January 2026 a broker may use an uncertified TIN in 2027 if it passes IRS TIN matching | Do not rely on it — send the W-9 | act |
| Name and TIN do not match (a marriage, a typo, a business name) | Withholding at 24% of every payment | Fix the mismatch with the broker before 31 December | act now |
| No TIN on file at all | Withholding at 24% | Send the W-9 | act now |
| You are not a US person and the account documents that | Not subject to backup withholding; accounts opened before 1 January 2026 with a non-US address on file get explicit 2027 relief | Keep the W-8 documentation current | n/a |
A broker is not required to warn you. The first many people will know is a payment arriving 24% short.
Why this one is worth ten minutes
It is withheld on the payment
Income tax is charged on gain; backup withholding is taken off the amount paid to you. On a break-even sale — the same coin in and out — the tax is nothing and the withholding is still 24%. High-volume traders are the worst hit, because the same money is sold and re-sold.
You get it back — a year later
It is a credit against your tax on the return for that year, and any excess comes back as a refund. Nothing is lost permanently. What is lost is the use of the money for up to sixteen months, without interest, which for an active trader is not a small thing.
The 2027 accommodations are narrow
Notice 2025-33 leaves some room for 2027 — a broker may use an uncertified TIN for a pre-2026 account if it passes IRS matching, and there is relief for documented foreign accounts. Neither is a plan. A signed W-9 is.
It stacks with the blank-basis problem
A 1099-DA that reports proceeds with no cost basis already overstates your gain. Add withholding on the same gross figure and you are financing a tax bill you do not owe, twice over. The free scan rebuilds the basis →
Questions people actually ask
Is this new, or has it always applied?
Backup withholding is an old rule (§3406). What is new is that digital-asset brokers became subject to it, and the IRS switched it off while the industry built the plumbing. Notice 2025-33 set the end of that grace period at 31 December 2026.
Does it apply to every sale?
It applies to reportable payments by a broker to a payee who has not furnished a certified TIN — so custodial exchange sales, yes. A transfer between your own wallets is not a payment. A purely self-custodial swap has no broker to withhold.
My exchange already has my SSN. Am I fine?
Probably, but "has a number" and "holds a certified W-9 whose name and TIN match IRS records" are different things — and the mismatch case is the one that bites, usually after a name change. Ask them to confirm the W-9 on file, in writing.
What if I trade on several platforms?
Each broker withholds on its own payments. One certified W-9 does not travel. Check every platform you sell on, including the ones you barely use.
Does ClearBasis need my SSN for this?
No, and we do not ask for one. Nothing on this page is sent anywhere — the calculation runs in your browser. The W-9 goes to your broker, never to us.
While you are here
Withholding is next year's problem. The 1099-DA that overstates your gain is this year's — and the two compound. A free scan rebuilds the cost basis your broker cannot see, so the number you are taxed on is the one you actually made.
Run the free scan Or check the 15 September deadline →
Sources: IRC §3406 (backup withholding, 24%) · IRS Notice 2025-33 — relief from backup withholding for digital-asset sales in calendar years 2025 and 2026, with limited further accommodations for 2027 (uncertified TINs verified through the IRS TIN Matching Program for accounts opened before 1 January 2026, and relief for documented foreign accounts) · Form W-9. Retrieved 27 August 2026.