IRS Finalizes Form 1099-DA: Mandatory Digital Asset Broker Reporting Rules Are Here (2025–2026)

The IRS and Treasury Department have published final regulations requiring brokers who facilitate digital asset sales to report gross proceeds on the new Form 1099-DA. Published in the Federal Register on December 30, 2024, these rules represent the most significant expansion of crypto tax information reporting since Congress amended the broker definition under the Infrastructure Investment and Jobs Act (Pub. L. 117-58, § 80603, codified at 26 U.S.C. § 6045). If you operate, use, or advise a US centralized exchange or brokerage platform, these rules demand immediate attention.

Key Takeaways

• New Form 1099-DA: Brokers must file information returns with the IRS and furnish payee statements to customers for digital asset dispositions, starting with transactions occurring on or after January 1, 2025 (gross proceeds reporting).
• Cost basis reporting phased in: Adjusted basis and gain/loss reporting begins for assets acquired on or after January 1, 2026, requiring wallet-by-wallet, account-by-account tracking.
• Broad broker definition: Centralized exchanges, broker-dealers, certain payment processors, and hosted wallet providers are covered. The final rules do not extend to decentralized or unhosted platforms in this tranche — DeFi broker rules were addressed in a separate rulemaking.
• Backup withholding applies: Failure to furnish a correct TIN subjects digital asset transactions to backup withholding under 26 U.S.C. § 3406.
• Universal cost basis method: Taxpayers must allocate basis on a wallet-by-wallet, account-by-account basis — no more pooling across platforms.

Who Is Affected?

The regulations primarily impact centralized digital asset trading platforms (e.g., Coinbase, Kraken, Gemini), broker-dealers handling digital assets, custodial wallet providers, and certain digital asset payment processors. Under 26 U.S.C. § 6045(c)(1), as amended, a “broker” includes any person who, for consideration, regularly effectuates digital asset transfers on behalf of another person.

Individual investors and traders are affected indirectly: they will receive 1099-DA forms and must reconcile reported information on their federal returns. Tax professionals and compliance officers should prepare for a significant increase in information-matching scrutiny from the IRS.

What Does This Mean Legally?

These final regulations implement statutory authority granted by Congress in 2021 and carry the full force of law under the Administrative Procedure Act (5 U.S.C. § 553). Key legal consequences include:

• Penalty exposure for brokers: Failure to file correct information returns triggers penalties under 26 U.S.C. § 6721 (up to $310 per return for 2025), and failure to furnish correct payee statements triggers penalties under 26 U.S.C. § 6722.
• Enhanced IRS enforcement capacity: Third-party reporting enables automated matching against individual returns, closing the substantial “tax gap” the IRS has identified in digital asset reporting.
• Basis tracking obligations: The wallet-by-wallet requirement eliminates the practice of using universal or FIFO-across-platforms methods, potentially increasing taxable gains for some taxpayers during transitions.

What to Do Now

• Exchanges and brokers: Confirm your systems can generate Form 1099-DA for 2025 gross proceeds. Begin building infrastructure for cost basis tracking on assets acquired from January 1, 2026.
• Tax professionals: Alert clients that 1099-DA forms will arrive for 2025 transactions. Update workflows to reconcile these forms against client records.
• Individual investors: Consolidate transaction records now. Identify which wallets and accounts are custodial (and will generate 1099-DAs) versus self-custodied (where you bear sole reporting responsibility).
• Compliance teams: Review TIN collection and verification procedures — backup withholding obligations are triggered by missing or incorrect TINs.

CryptoLaw.blog will publish a comprehensive guide to Form 1099-DA compliance obligations in the coming weeks. For the full text of the final regulations, see 89 FR 106932.

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.