New boxes for blockchain: A 1099-DA guide for tax professionals

Crypto tax reporting can be challenging even for experienced tax accountants. While recent IRS regulations have introduced more structured reporting standards for cryptocurrency, the decentralized nature and evolving treatment of digital assets under U.S. tax law continue to create unique compliance complexities. 

To improve reporting consistency, the IRS has introduced Form 1099-DA, a new information return for digital asset transactions. Beginning with the 2025 tax year (for forms issued in early 2026), custodial crypto brokerages in the United States must provide Form 1099-DA to both their customers and the IRS, reporting sales and exchanges of digital assets that occurred during the year. The goal is to align crypto reporting more closely with traditional securities reporting under Form 1099-B. However, digital assets present additional tracking and reporting challenges, particularly for assets held or transacted outside custodial exchanges. As a result, accountants should view these forms as a starting point, not a complete record.

In some cases, IRS 1099-DA compliance can generate more confusion than clarity. This 1099-DA guide for tax professionals highlights current limitations and explains how it will affect digital asset tax reporting going forward.

Form 1099-DA: A quick summary

Form 1099-DA is an IRS information return used to report dispositions of digital assets on custodial trading platforms. Its purpose is similar to Form 1099-B, providing standardized reporting of gross proceeds, and, for covered digital assets, cost basis and gain or loss information, to both taxpayers and the IRS. However, while Form 1099-B applies to traditional financial instruments such as stocks and ETFs, Form 1099-DA specifically covers digital assets as defined under Internal Revenue Code §6045(g)(3)(D), including cryptocurrencies, stablecoins, and non-fungible tokens (NFTs). 

Who issues 1099-DA?

Custodial digital asset brokers will be required to file Form 1099-DA with the IRS and furnish copies to U.S. taxpayers beginning in early 2026 for transactions occurring in 2025. For example, centralized exchanges (CEXs) like Coinbase, Kraken, and Gemini are expected to begin issuing these forms in early 2026.

Form 1099-DA reporting is limited to dispositions through U.S. custodial exchanges. Sales and exchanges that occur through foreign exchanges, self-custodial wallets, decentralized finance (DeFi) applications, non-custodial NFT marketplaces like Magic Eden and OpenSea, and peer-to-peer transfers generally fall outside the reporting regime. However, taxable dispositions through those platforms must still be included in a taxpayer’s return, even if not reported on a 1099-DA. 

What does Form 1099-DA cover?

Form 1099-DA provides similar reporting to Form 1099-B, which reports sales of securities such as stocks and bonds. However, Form 1099-DA is specifically designed to report dispositions of digital assets through custodial brokers. The form generally includes key transaction details such as:

• Taxpayer identification information (name, address, and TIN)
• Broker and account identifiers
• Name of and code for digital asset
• Units of digital assets sold or exchanged
• Dates of disposition 
• Gross proceeds
• Cost basis, gain or loss information, and date of acquisition for covered assets, beginning with 2026 acquisitions
• Any federal or state tax withheld, if applicable

Form 1099-DA reporting will be limited in scope for the 2025 tax year. This is because the IRS’s final digital asset regulations distinguish between covered and noncovered digital assets. Brokers are only required to report cost basis, acquisition date, and gain or loss information for dispositions of covered digital assets. 

For Form 1099-DA purposes, a covered security includes a digital asset acquired after December 31, 2025, in an account where the broker provides custodial services, and that remains in that account until the broker effects its disposition.

Accordingly, transactions involving digital assets acquired before 2026 are considered noncovered. For the 2025 tax year, brokers will generally report only gross proceeds from digital asset sales or exchanges. Cost basis reporting to the IRS is optional, though some platforms may elect to provide that data to users on substitute statements for convenience.

Beginning in 2026, cost basis and gain or loss reporting will apply only if the digital asset remains in the same custodial account from acquisition through disposition. Transfers out of custody, or between unrelated brokers, generally break the covered chain, resulting in noncovered status. Because brokers typically lack complete transaction history for noncovered assets, tax professionals will need to rely on client-supplied data or reconciliation tools to determine basis and gains accurately. 

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Exempt transactions not reported on Form 1099-DA

While Form 1099-DA is designed to capture most taxable dispositions occurring through custodial brokers, several categories of transactions may be taxable to the taxpayer but exempt from broker reporting under current IRS guidance. Examples include:

• Sales of qualifying stablecoins in exchange for digital assets that are not qualifying stablecoins (for example, using USDC to purchase BTC).
• Sales or exchanges of qualifying stablecoins for cash or other qualifying stablecoins when total qualifying sales during the year are $10,000 or less.
• Certain lending and wrapping transactions that fall within the temporary exclusions under Notice 2024-57.
• Taxable dispositions that occur off-platform or without broker visibility, such as sending digital assets to a third party in exchange for goods or services, where the custodial broker records only a withdrawal.

Although these transactions are not required to be reported on Form 1099-DA, they may still be taxable and must be reported by the taxpayer. Some brokers may still reflect certain categories of these transactions on substitute customer statements for informational purposes.

Digital asset tax form guidance: Reporting Form 1099-DA as a tax professional

Form 1099-DA will report information on both covered and noncovered digital asset dispositions that occur through U.S. custodial brokers. However, for noncovered assets, such as those acquired before 2026 or transferred into a custodial account from an external wallet, the information reported will generally be limited to gross proceeds. As a result, Form 1099-DA should be treated as a starting point for digital asset reconciliation, not a complete record.

For the 2025 tax year, all reported transactions will be noncovered. While brokers may optionally include cost basis and gain/loss data on substitute statements if taxpayers provide complete transaction information (customer-provided information), that reporting is not required.

To reconcile Form 1099-DA with a taxpayer’s complete digital asset activity, accountants should confirm whether any digital assets were transferred between brokers or to self-custody wallets, as those movements can break the covered chain and affect cost basis reporting. In addition, separate tracking is required for DeFi transactions, staking rewards, and other activities that fall outside the broker reporting regime.

Best practices for working with clients who are involved with digital assets include:

• Communicate early and often: Proactively educate clients about the scope and limitations of Form 1099-DA reporting. Remind them that even if certain digital asset transactions do not appear on a 1099-DA (like those on self-custodial wallets and dApps), they remain subject to U.S. tax reporting and documentation requirements. 
• Ask about activity outside of U.S. custodial brokers: Transactions executed through foreign exchanges, self-custodied wallets, or DeFi protocols will not appear on Form 1099-DA. Tax professionals should specifically inquire about these activities, along with yield farming, staking, and airdrops, to ensure the client’s tax return reflects all taxable events.
• Consider crypto tax software: Given the high transaction volume and multi-platform nature of many digital asset portfolios, dedicated crypto tax software can significantly reduce manual reconciliation risk. Suggest clients explore software solutions that integrate with exchange APIs and public wallet addresses, such as CoinTracker's Portfolio Tracker, to simplify 1099-DA reconciliation.
• Report Form 1099-DA like other 1099 information returns: Form 1099-DA data is reported on Form 8949, similar to Form 1099-B. However, because cost basis reporting may be incomplete or inconsistent, especially for noncovered assets, accountants should reconcile 1099-DA entries to their clients’ books and records before finalizing gains or losses.

Reconcile crypto transactions with CoinTracker 

Because Form 1099-DA only covers transactions executed through U.S. custodial brokers, many digital asset transactions, such as dispositions through self-hosted wallets and DeFi platforms, will not appear on the form. In addition, when digital assets are transferred out of a custodial account before being sold, those dispositions generally lose covered status, meaning cost basis and gain/loss details will not be reported to the IRS. To maintain accurate records, tax professionals should ensure that clients’ exchange and wallet activity is consolidated on a single tracking platform or reconciled manually to capture all taxable events.

CoinTracker makes this possible through an intuitive Portfolio Tracker dashboard. On top of recording all crypto transactions throughout the year, CoinTracker can import this data into IRS-compliant forms that are ready for a crypto tax accountant or tools like TurboTax and H&R Block.

Tax time is approaching – are you prepared? Let us guide you through crypto tax essentials and stay on top of your filings.

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.

FAQ

How should tax professionals handle 1099-DA forms?

Form 1099-DA can serve as a starting point for verifying a taxpayer’s digital asset transactions on U.S. custodial brokers, but it rarely presents a complete picture. Accountants should reconcile the data reported by brokers, typically gross proceeds and, for covered digital assets, cost basis and gain/loss information, with the client’s own transaction records to ensure that cost basis and gains and losses are reported accurately. In addition, accountants should ensure that any taxable events occurring on foreign exchanges, self-hosted wallets, and DeFi platforms are also reported.

What are the best practices for preparing taxes with 1099-DA?

Understand your clients’ involvement with digital assets early and request complete wallet and exchange records from clients. Confirm whether any assets were transferred between brokers or to self-custody, since those movements affect covered status and cost basis reporting. Document assumptions used in gain or loss calculations to maintain defensibility under IRS examination.

How do I reconcile 1099-DA with crypto transaction records?

1099-DA reconciliation involves comparing dispositions reported on Form 1099-DA with the taxpayer’s detailed transaction history from custodial exchanges, on-chain wallets, and other sources. Where the form lacks cost basis or gain/loss data, common for noncovered assets, use the client’s records or crypto tax software outputs to complete Form 8949 accurately. Differences between the broker-reported basis and the taxpayer’s books and records should be documented.