The first wave of Form 1099-DA filings arrives in early 2026. If your clients hold Bitcoin, Ethereum, NFTs, or stablecoins, these reporting requirements reshape how you handle digital asset compliance.
This guide covers who files Form 1099-DA, what information appears on the form, the phased timeline for gross proceeds and cost basis reporting, and how to prepare your practice before forms hit client mailboxes.
Form 1099-DA is a new IRS information return requiring brokers to report digital asset transactions to both the IRS and taxpayers. The form covers cryptocurrency, NFTs, and stablecoins. Reporting begins with transactions occurring on or after January 1, 2025. Brokers initially report gross proceeds from sales, exchanges, and dispositions. Mandatory cost basis reporting starts for covered securities acquired on or after January 1, 2026.
The Infrastructure Investment and Jobs Act of 2021 expanded broker reporting requirements under IRC Section 6045 to include digital assets, part of a global trend with 48 nations pledging to adopt similar reporting frameworks by 2027. Before Form 1099-DA, taxpayers self-reported crypto gains and losses, often with incomplete records-contributing to an estimated $50 billion tax revenue gap from unreported digital asset transactions. Form 1099-DA creates a standardized reporting mechanism similar to Form 1099-B for stocks and bonds.
The IRS defines "broker" broadly under IRC Section 6045. A broker is any person who, for consideration, regularly acts as a middleman for digital asset sales.
U.S. digital asset brokers include centralized exchanges, trading platforms, and payment processors that facilitate digital asset sales. If a platform holds custody of client assets and executes transactions on their behalf, it qualifies as a broker under the final regulations. Coinbase, Kraken, Gemini, and similar exchanges fall into this category.
Custodial platforms-where the exchange controls private keys-are subject to 1099-DA reporting. Non-custodial and decentralized platforms present a different picture.
Under current rules, truly decentralized protocols without a controlling entity are not required to file. The IRS has indicated that additional rulemaking will address DeFi platforms, so monitor Treasury guidance for updates.
Several categories fall outside the broker definition:
IRC Section 6045(g)(3)(D) defines "digital asset" as any digital representation of value recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.
Bitcoin, Ethereum, and virtually all other virtual currencies recorded on blockchain networks fall within scope. Utility tokens, governance tokens, and any cryptocurrency traded on an exchange are included.
Non-fungible tokens representing digital art, collectibles, gaming items, or tokenized real-world assets are covered. The IRS treats NFT sales or exchanges as reportable transactions regardless of their non-fungible characteristics.
USD-pegged stablecoins like USDC and USDT qualify as digital assets under this definition. Wrapped tokens, such as Wrapped Bitcoin (WBTC), are also included. Conversions between wrapped and unwrapped versions trigger reporting.
The form captures transaction-level data across these key boxes:
Box 4 reports the total amount received from dispositions-sales, exchanges, or payments for goods and services. This figure represents proceeds received, not profit.
Boxes 1 through 3 identify what was sold and when. The description includes the asset name and quantity. The dates establish a holding period for determining short-term versus long-term capital gains treatment under IRC Section 1222.
Cost basis-original purchase price plus transaction fees-appears in Box 5. This field phases in over time based on acquisition date.
The IRS provides complete box-by-box guidance in the Instructions for Form 1099-DA. For transactions where basis is unknown or the asset was acquired before reporting requirements began, certain boxes are left blank or marked as "noncovered."
Different requirements apply depending on when transactions occur and when assets were acquired.
Brokers report gross proceeds for transactions occurring on or after January 1, 2025. Forms covering 2025 transactions will be issued to taxpayers by February 15, 2026.
Cost basis reporting becomes mandatory for covered securities acquired on or after January 1, 2026. For 2025 transactions, brokers may report basis but are not required to do so.
Many taxpayers will receive 2025 forms showing proceeds but no basis. In those cases, taxpayers calculate gains independently using their own records.
When digital assets transfer between brokers, the sending broker provides a transfer statement to the receiving broker. This enables accurate cost basis tracking across platforms-a significant improvement over the current environment where basis information disappears during transfers.
Cost basis calculation remains the most complex compliance issue for digital asset transactions.
The IRS permits several methods for identifying which units are sold:
Without a specified method, the IRS applies default rules-typically FIFO-which may not produce the most favorable tax outcome for your client.
Many clients purchased crypto years ago on exchanges that no longer exist or lost access to transaction records. Reconstructing basis requires gathering bank statements, email confirmations, blockchain explorer data, and any other documentation showing original purchase prices.
Start this process early. Waiting until tax season means scrambling for records that are no longer accessible.
When basis cannot be established, the IRS treats it as zero. Zero basis results in the maximum possible taxable gain-entire proceeds become taxable, with incorrect reporting potentially triggering extended six-year audit periods. This makes documentation critical, especially for assets acquired before broker reporting began.
Staking rewards and airdrops represent income rather than sales proceeds. These amounts appear on Form 1099-MISC or 1099-NEC, not Form 1099-DA. Income is taxed at ordinary rates when received under IRC Section 61; sales proceeds are taxed as capital gains when disposed under IRC Section 1001.
Brokers provide Form 1099-DA to taxpayers by January 31 if the form contains no basis information, though the IRS won't impose penalties for 2025 transactions if brokers make good faith efforts to file correctly. If basis is reported in Box 5 or Box 10, the deadline extends to February 15.
Electronic filing with the IRS follows standard information return deadlines-March 31 for electronic filers. Paper filing deadlines are earlier, typically the end of February.
IRC Sections 6721 and 6722 impose penalties on brokers who fail to file accurate forms or furnish correct statements to recipients. Penalties increase for intentional disregard of filing requirements. While these penalties apply to brokers rather than taxpayers, inaccurate forms create compliance headaches for everyone involved.
Each transaction from Form 1099-DA flows to Form 8949 for reporting sales and dispositions of capital assets. Short-term transactions (held one year or less) go on Part I. Long-term transactions go on Part II. Totals transfer to Schedule D.
If the basis reported on Form 1099-DA is incorrect, adjust it on Form 8949 using the appropriate adjustment code in Column (g).
Taxpayers report all digital asset dispositions regardless of whether a form was issued. The Form 1040 digital asset question asks whether you received, sold, or otherwise disposed of digital assets.
Transactions on foreign exchanges, peer-to-peer sales, and DeFi activity do not generate a 1099-DA, but they remain taxable events.
Add digital asset questions to engagement letters and intake questionnaires. Ask about exchanges used, approximate transaction volume, and whether clients hold assets in self-custody wallets. These answers determine how much documentation work lies ahead.
Have clients export transaction histories from all platforms now, before exchange shutdowns or data retention issues arise. Blockchain explorers and specialized crypto tax software help reconstruct missing records. Organized documentation before forms arrive makes tax season manageable.
Researching evolving IRS guidance on Form 1099-DA, state conformity rules, and complex cost basis scenarios takes time. AI-powered research tools accelerate this work by surfacing citation-backed answers to specific questions about digital asset reporting requirements.
No. Form 1099-DA is only issued by brokers. Self-custody wallets-where the taxpayer controls private keys-are not brokers under current IRS rules. Taxable transactions must still be reported, but no form is issued for them.
Decentralized finance protocols are not currently required to issue Form 1099-DA. Taxpayers still report taxable DeFi transactions-including swaps and liquidity pool withdrawals-using their own records on Form 8949.
Yes. Exchanging one cryptocurrency for another is a taxable disposition under IRC Section 1001. Brokers report the gross proceeds on Form 1099-DA, and taxpayers report the gain or loss on Form 8949.
Clients should keep exchange statements, wallet transaction histories, and documentation of original purchase prices and dates. These records verify form accuracy and support basis calculations when forms are incomplete.
State conformity varies significantly. Some states follow federal digital asset treatment. Others impose separate reporting rules or different tax rates on crypto gains. Check your specific state's position-California, New York, and Texas each handle digital assets differently.
Ask any federal or state question about Form 1099-DA requirements-IRC Section 6045 broker definitions, cost basis calculation methods under Treas. Reg. 1.1012-1, state conformity positions-and get instant, citation-backed answers. Upload client transaction histories to maintain project context across the engagement. Generate draft memos explaining cost basis calculations or client communications about missing 1099-DA forms, ready for your review.
