Form 1099-DA Complete Guide: Crypto Tax Reporting Requirements for 2025-2026

The era of anonymous cryptocurrency transactions with the IRS ended on January 1, 2025. With Form 1099-DA now in effect, brokers and exchanges must report your digital asset sales directly to the IRS—mirroring the reporting infrastructure that has existed for stocks and securities for decades.

This isn’t a future concern. If you sold, traded, or disposed of cryptocurrency on a US exchange in 2025, you will receive Form 1099-DA in January 2026. The IRS will receive an identical copy. Any mismatch between what you report and what your broker reports will trigger automated notices—or worse.

This guide breaks down exactly what changed, who must comply, and what steps you need to take for the 2025 tax year and beyond.

Key Takeaways

• Form 1099-DA reporting began January 1, 2025 under Treasury regulations implementing the Infrastructure Investment and Jobs Act broker reporting requirements (26 U.S.C. § 6045, as amended by Pub. L. No. 117-58, § 80603).
• Brokers must report gross proceeds from all digital asset sales; cost basis reporting phases in starting 2026 for assets acquired and sold at the same broker.
• Wallet-by-wallet cost basis tracking is mandatory—you can no longer use “universal” FIFO or specific identification across all your accounts.
• DeFi protocols have delayed compliance, but you remain legally required to self-report all taxable DeFi transactions—and the IRS can still trace them via blockchain analytics.
• Your first 1099-DA arrives January 2026—discrepancies between your return and the broker’s report will trigger IRS matching notices.

What Is Form 1099-DA?

Form 1099-DA (“Digital Assets”) is the IRS information return specifically designed for reporting cryptocurrency and digital asset transactions. Congress created this reporting requirement through Section 80603 of the Infrastructure Investment and Jobs Act of 2021 (Pub. L. No. 117-58), which expanded the definition of “broker” under Internal Revenue Code § 6045 to include persons who effectuate digital asset transfers on behalf of others.

The Treasury Department and IRS published final regulations implementing this requirement on June 28, 2024 (89 Fed. Reg. 53534). These regulations took effect for transactions occurring on or after January 1, 2025.

The form requires brokers to report:

• Gross proceeds from each digital asset sale or disposition
• Date and time of the transaction
• The digital asset involved (name, symbol, and quantity)
• Cost basis (beginning for certain 2026 transactions)
• Whether gain or loss is short-term or long-term (once cost basis reporting is fully implemented)

What Changed: Before vs. After Form 1099-DA

Before January 1, 2025	After January 1, 2025
No standardized IRS reporting form for crypto	Form 1099-DA required for all covered brokers
Inconsistent 1099-K or 1099-MISC from some exchanges	Uniform transaction-level reporting to IRS
Cost basis tracking entirely taxpayer’s responsibility	Brokers track and report cost basis (phasing in 2026)
IRS relied on summonses to obtain exchange data	Automatic information sharing—IRS matching is immediate
Universal cost basis methods permitted	Wallet-by-wallet basis tracking mandatory

Who Must File Form 1099-DA?

Under the final regulations at 26 C.F.R. § 1.6045-1 (as amended), the following entities qualify as “brokers” for digital asset reporting purposes:

Covered Brokers (Effective January 1, 2025)

• Centralized exchanges—Coinbase, Kraken, Gemini, Binance.US, and similar platforms operating in the United States
• Hosted wallet providers that effectuate sales on behalf of customers
• Digital asset trading platforms offering custodial services
• Payment processors that facilitate crypto-to-fiat conversions as a regular business
• Digital asset kiosks (Bitcoin ATMs) operated by businesses in the trade of effectuating transfers

Entities With Delayed or No Reporting Requirements

• Decentralized exchanges (DEXs) and DeFi front-ends: The Treasury issued proposed regulations in August 2024 that would classify certain DeFi “front-end” service providers as brokers, with reporting potentially beginning in 2027. These proposed rules remain subject to finalization and may be modified as the current SEC administration focuses on “regulatory clarity” over aggressive enforcement.
• Non-custodial wallet providers: Pure software wallet providers (MetaMask, Ledger Live in self-custody mode) that do not effectuate transactions are not classified as brokers.
• Miners and validators: Not brokers for transactions they process on behalf of the network, though they must report their own mining/staking income as ordinary income.

Critical point: Even if a platform does not file Form 1099-DA, you are still legally required to report all taxable transactions. The IRS has demonstrated it can trace blockchain transactions through analytics firms like Chainalysis. “No 1099” does not mean “no tax obligation.”

What Transactions Appear on Form 1099-DA?

Form 1099-DA covers “digital assets” as defined in 26 U.S.C. § 6045(g)(3)(D): any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology. This includes:

• Cryptocurrencies (Bitcoin, Ethereum, Solana, etc.)
• Stablecoins (USDC, USDT—even 1:1 swaps are reportable)
• Wrapped tokens and tokenized assets
• Certain NFTs functioning as financial instruments

Reportable Events

• Sales for fiat currency—selling BTC for USD
• Crypto-to-crypto exchanges—trading ETH for SOL (yes, this is taxable)
• Payments for goods or services using cryptocurrency
• Liquidations and margin calls

Not Reported on Form 1099-DA

• Wallet-to-wallet transfers of the same asset you own—moving your BTC from Coinbase to your Ledger is not a taxable event (but may appear as a withdrawal on exchange records)
• Receipt of staking rewards, mining income, or airdrops—these are ordinary income at receipt, potentially reported on Form 1099-MISC or 1099-NEC, not 1099-DA
• Gifts of cryptocurrency—though gift tax rules under 26 U.S.C. § 2503 may apply

The Wallet-by-Wallet Cost Basis Rule Explained

The most disruptive change for active traders is the new “wallet-by-wallet” (or “account-by-account”) cost basis tracking requirement under the final regulations.

Previously, many taxpayers used “universal” cost basis methods—aggregating all their Bitcoin holdings across all exchanges and wallets, then applying FIFO or specific identification globally. This is no longer permitted for assets held with brokers subject to reporting.

How It Works Now

Example: You purchased 1 BTC on Coinbase in 2021 for $30,000, and 1 BTC on Kraken in 2023 for $45,000. In 2025, you sell 1 BTC on Kraken for $60,000.

• Old method (universal FIFO): Your cost basis would be $30,000 (the oldest lot), yielding a $30,000 gain.
• New method (wallet-by-wallet): Your cost basis is $45,000 (the Kraken-held asset), yielding a $15,000 gain.

The result can work for or against you depending on your specific holdings—but you no longer have the flexibility to optimize across accounts.

What Happens When You Transfer Between Wallets?

This is where complexity multiplies. When you transfer cryptocurrency from Exchange A to Exchange B:

1. Exchange A records an outgoing transfer (not a sale)
2. Exchange B receives the asset but does not know your original cost basis
3. You must provide cost basis information to Exchange B, or it may report the asset with a zero or unknown basis

Failure to properly track and communicate cost basis across transfers can result in dramatically overstated gains on your 1099-DA from the receiving exchange.

Cost Basis Reporting Timeline

• 2025 transactions: Brokers report gross proceeds only; cost basis reporting is optional
• 2026 onward: Brokers must report cost basis for digital assets acquired on or after January 1, 2025, if sold at the same broker where acquired
• Pre-2025 acquisitions: Cost basis remains entirely your responsibility to document and substantiate

Common Mistakes to Avoid

Mistake 1: Assuming “No 1099” Means “No Tax”

DeFi swaps, foreign exchange transactions, and peer-to-peer sales are all taxable even without 1099-DA reporting. The IRS Form 1040 asks directly: “At any time during 2025, did you receive, sell, exchange, or otherwise dispose of any digital assets?” Answering “No” when you have unreported transactions is making a false statement under penalties of perjury.

Mistake 2: Treating All Transfers as Sales

Moving crypto between your own wallets is not a taxable event. However, some exchanges may report large outgoing transfers ambiguously. Keep records showing the destination wallet is yours.

Mistake 3: Using Universal Cost Basis Methods

If you’ve been using software configured for universal FIFO across all accounts, you must reconfigure it for wallet-by-wallet tracking before filing your 2025 return.

Mistake 4: Ignoring Stablecoin Trades

Swapping USDC for USDT, or using stablecoins to enter/exit positions, creates taxable events. The gain or loss may be minimal, but failure to report creates matching issues with your 1099-DA.

Mistake 5: Not Reconciling Before Filing

Your 1099-DA may contain errors—exchange pricing data may differ from actual execution prices, or transfers may be misclassified. Always reconcile against your own records before filing.

How Form 1099-DA Interacts With Other Tax Forms

Form 1099-DA is an information return to the IRS—it does not replace your own reporting obligations:

• Form 8949: Sales and Other Dispositions of Capital Assets—you must list each transaction and calculate gain/loss
• Schedule D (Form 1040): Summary of capital gains and losses from Form 8949
• Schedule 1 (Form 1040): Report staking rewards, mining income, and airdrops as “Other Income”
• Schedule C: If you’re mining or trading as a business

Foreign Account Reporting

If you held cryptocurrency on a foreign exchange (e.g., Binance global, KuCoin, or OKX) with aggregate value exceeding $10,000 at any point during the year, the conservative compliance position is to file an FBAR (FinCEN Form 114) under 31 U.S.C. § 5314. FinCEN proposed rules in 2020 that would explicitly require FBAR reporting for foreign crypto accounts, but these rules have not been finalized. Given the severe penalties for FBAR non-compliance ($10,000+ per violation, or greater for willful violations), many practitioners recommend filing until regulatory clarity emerges.

What to Do Now: Actionable Steps for 2025-2026

Step 1: Create a Complete Account Inventory

List every platform where you have ever held or transacted cryptocurrency:

• US centralized exchanges
• Foreign exchanges (note: FBAR implications)
• DeFi protocols and DEXs you’ve used
• Hardware wallets and software wallets
• NFT marketplaces
• Gaming platforms with crypto/NFT components

Step 2: Implement Wallet-by-Wallet Tracking Now

Configure your crypto tax software (CoinTracker, Koinly, TokenTax, CoinLedger, or similar) for wallet-by-wallet cost basis. Do this before year-end, not at tax time.

Step 3: Document All Pre-2025 Cost Basis

For assets acquired before January 1, 2025, gather every record you can:

• Exchange purchase confirmations
• Bank/credit card statements showing fiat deposits
• Historical emails from exchanges
• Blockchain transaction records with contemporaneous price data

Brokers will not report cost basis for pre-2025 acquisitions. You bear the burden of proof.

Step 4: Choose Your Accounting Method

Within each wallet/account, you may use:

• FIFO (first-in, first-out): Default method if you don’t specify otherwise
• Specific identification: You choose which lot to sell, but must adequately identify it at or before the time of sale

Document your method and apply it consistently.

Step 5: Review Your 1099-DA Carefully (January 2026)

When you receive Form 1099-DA:

• Compare every line to your own transaction records
• Check for transfers incorrectly reported as sales
• Verify gross proceeds amounts match your execution records
• Note any transactions your records show that are missing from the 1099-DA

If there are errors, contact the broker for a corrected form before filing.

Step 6: Engage a Qualified Tax Professional

If you have significant crypto holdings, high transaction volume, DeFi exposure, or foreign exchange accounts, this is not a DIY situation. Engage a CPA or tax attorney with specific cryptocurrency experience.

Practical Implications by User Type

Casual Holder (Buy and Hold on US Exchange)

Impact: Low complexity. Your exchange handles reporting. Focus on: (1) keeping records of your original purchases for cost basis, and (2) reconciling your 1099-DA when it arrives.

Active Trader

Impact: High complexity. Wallet-by-wallet rules significantly complicate cost basis tracking, especially if you move funds between exchanges. You need robust crypto tax software and should consider quarterly reconciliation.

DeFi User

Impact: Full self-reporting required. Every swap, LP deposit/withdrawal, yield harvest, and bridge transaction is potentially taxable. You get no 1099-DA for DeFi, but the IRS can trace everything on-chain. Track meticulously.

Crypto Business Operator

Impact: Multiple compliance layers. Beyond 1099-DA, consider employer withholding for crypto compensation, 1099-NEC for contractor payments in crypto, and potential sales tax implications for accepting crypto as payment.

Penalties for Non-Compliance

With Form 1099-DA enabling automated IRS matching, the risk of detection for unreported crypto income has increased substantially. Applicable penalties include:

• Accuracy-related penalty: 20% of underpayment (26 U.S.C. § 6662)
• Fraud penalty: 75% of underpayment (26 U.S.C. § 6663)
• Failure to file penalty: 5% of unpaid taxes per month, up to 25% (26 U.S.C. § 6651)
• Criminal tax evasion: Up to 5 years imprisonment and $250,000 fine (26 U.S.C. § 7201)

The IRS Criminal Investigation division has identified cryptocurrency as a continuing enforcement priority. The combination of 1099-DA reporting and blockchain analytics makes crypto tax evasion increasingly detectable.

Looking Ahead: 2026 and Beyond

The 2025 tax year is transitional. Key developments to monitor:

• Full cost basis reporting (2026): Brokers will report cost basis for assets acquired and sold at the same broker after January 1, 2025.
• DeFi broker rules (uncertain timeline): Treasury’s August 2024 proposed regulations remain subject to finalization. Under the current administration’s focus on regulatory clarity, these rules may be modified or delayed.
• FBAR clarity: FinCEN may finalize rules explicitly addressing foreign crypto account reporting requirements.
• Stablecoin developments: The GENIUS Act’s 1:1 backing requirements for payment stablecoins may prompt additional IRS guidance on stablecoin tax treatment.

Conclusion

Form 1099-DA represents the most significant expansion of cryptocurrency tax reporting since the IRS first classified cryptocurrency as property in Notice 2014-21. For the 2025 tax year and beyond, US crypto users must adapt to a new reality: the IRS now receives your transaction data directly from exchanges.

Compliance has become both easier and harder. Easier because brokers now provide standardized reports. Harder because the wallet-by-wallet cost basis rules create tracking complexity, especially for users who move assets between platforms.

The time to prepare is now—before your first 1099-DA arrives in January 2026. Audit your accounts, implement proper tracking, preserve your historical records, and consult with a qualified tax professional.

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This article is for informational and educational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations in the cryptocurrency space change rapidly—consult a qualified attorney for advice specific to your situation and jurisdiction. Seth Goettelman is licensed to practice law in Wisconsin and Florida.