Form 1099-DA: What tax professionals need to know about the new crypto reporting requirements
Jan 21, 2026・6 min read
tl;dr
- Form 1099-DA is a significant step toward transparency, but it’s not a complete solution for calculating crypto tax liability.
- The form wont cover self custody activity, DeFi protocols, and accurate cost basis for transferred assets.
- Relying solely on 1099-DA data may lead to incorrect tax returns, understated or overstated liability, and potential IRS scrutiny.
- Firms need a "crypto tax aggregator" approach that uses specialized software to reconcile 1099-DA forms against on-chain data and client records.
1099-DA is a starting point, not the whole story
For years, the "crypto tax gap" has been a primary target for the IRS. The Infrastructure Investment and Jobs Act gave Treasury authority to require broker reporting for digital assets, and the IRS later implemented those rules through Form 1099-DA, the first tax form specifically designed for digital asset reporting.
For tax professionals, the arrival of this form is a double-edged sword. On one hand, it validates the asset class and provides a paper trail. On the other hand, it creates a dangerous misconception among clients (and even some junior staff): "I received a tax form, so the numbers on it must be my final answer."
This is rarely true in crypto.
While the 1099-DA solves specific reporting gaps regarding centralized exchanges, it does not replace the need for transaction-level reconstruction, reconciliation, and a robust crypto-aware tax system. It is a data point, not a tax return.
What 1099-DA was designed to do
To understand the form's limitations, we must look at its regulatory intent. The IRS designed Form 1099-DA primarily to capture activity from "Digital Asset Brokers."
In plain English... The IRS wants to know who sold crypto, how much they sold it for, and when they sold it, just like they do with stocks via Form 1099-B.
The scope of the form
Starting with transactions in 2025 (reported in 2026), brokers must file Form 1099-DA, Digital Asset Proceeds From Broker Transactions, for each sale or disposition of a digital asset they execute on behalf of customers. The form provides standardized information that enables taxpayers and the IRS to reconcile digital asset proceeds with income tax filings.
Each Form 1099-DA must include the following for every reportable transaction:
- Customer identifying information: The customer's name, address, and Taxpayer Identification Number (TIN) collected through the broker's KYC process.
- Asset identification: The name and DTIF identifier of the digital asset sold.
- Quantity disposed: The number of digital asset units sold or exchanged.
- Disposition date: Required for each reportable sale, except when the broker uses an optional reporting method for qualifying stablecoins or specified NFTs.
- Gross proceeds: The total amount realized from the sale or disposition.
- Acquisition date, cost basis, and holding-period classification: These three items are reported based on whether the asset is covered or noncovered (see below).
Covered vs. noncovered digital assets
Covered digital asset: A digital asset acquired on or after January 1, 2026, in an account where the broker provides custodial services and held in that same account until disposition. For covered assets, brokers must report acquisition date, cost basis, and gain or loss type (short- or long-term).
Noncovered digital asset: Any digital asset acquired before January 1, 2026, transferred into a broker account, or otherwise not meeting the covered criteria. Brokers may check box 9 to designate noncovered status. When box 9 is checked, brokers are not required to provide acquisition information (date acquired, cost basis, gain or loss and term), though they may voluntarily do so with penalty protection.
For 2025 transactions, all digital assets are noncovered, so only gross proceeds and disposition date are required. Beginning in 2026, cost basis and acquisition-date reporting become mandatory for covered assets but remain optional for noncovered assets.
What 1099-DA actually helps with
We shouldn't discount the utility of the form entirely. It solves several operational headaches for accounting firms.
Immediate visibility
The most immediate benefit is client identification. You no longer have to rely solely on a client remembering to tell you they trade crypto. If a 1099-DA exists, you know there is activity that needs to be addressed.
An initial sanity check
For clients who only trade on a single, centralized exchange (e.g. Coinbase or Kraken) and never move funds off-platform, the 1099-DA may include complete acquisition information, such as cost basis, gain (loss), acquisition dates and holding period.
Triage and segmentation
The presence (or absence) of these forms allows firms to segment clients:
- Standard clients: High reliance on 1099-DA; lower billing complexity.
- Complex clients: High volume of 1099-DAs mixed with self-custody; requires deep reconciliation work.
2025
Crypto Tax
Guide is here
CoinTracker's definitive guide to Bitcoin & crypto taxes provides everything you need to know to file your 2024 crypto taxes accurately.
What 1099-DA does not solve (and where the gaps are)
This is the critical section for any CPA looking to mitigate liability. At the core, there are a variety of factors that make it impossible for a single form to capture the entire picture.
- Ability to transfer assets in and out of exchanges, to other exchanges, self-custody, etc
- No transfer statements (6045A) when assets are transferred between platforms
- Non-custodial brokers / self-custody / defi / foreign exchanges do not issue 1099-DAs, so creates a gap.
The walled garden problem
Form 1099-DA is issued by a broker. The broker definition applies primarily to custodial or intermediary businesses that can identify their customers and facilitate transactions. Certain participants are outside the scope of Form 1099-DA reporting, meaning the form has no insight into the activity that takes place off of the broker’s platform. Examples include:
- Decentralized or non-custodial platforms that merely publish or maintain smart contract code and do not custody assets or identify users.
- Proof-of-work and proof-of-stake validators that provide only network validation services without acting as intermediaries.
- Software and hardware providers that sell or license wallets or tools enabling users to self-custody digital assets without facilitating trades.
No transfer statements (6045A) creating the cost basis "black hole"
This is the single most common source of tax liability errors.
In plain English... If a client buys Bitcoin on Exchange A and transfers it to Exchange B to sell, Exchange B may not know the original purchase price.
Consequently, Exchange B may issue a 1099-DA showing the sale proceeds but listing the cost basis as “unknown." If you file based on this form without obtaining the acquisition information, you may massively overstate your client's capital gains.
No single view of the truth
A high-net worth client might use five different Us based, custodial exchanges and three distinct wallets. You will receive five different 1099-DA substitute statements, and if the client transferred crypto between platforms, they will all have missing acquisition information. To calculate a taxpayer’s complete capital gains from all of their exchanges and wallets, and to ensure that cost basis is tracked properly and gains are accurate, you must consolidate these sources.
The scenario: why the form fails without reconciliation
To illustrate the danger, let’s look at a hypothetical client, Marcus.
The situation:
- Jan 2022: Marcus buys 1 BTC for $30,000 on Exchange X.
- Feb 2022: Marcus transfers the 1 BTC to a secure cold wallet (Self-Custody).
- Dec 2024: Marcus transfers the 1 BTC to Exchange Y and sells it for $50,000.
The 1099-DA reality:
- Exchange X: Issues nothing (no sale occurred).
- Exchange Y: Issues a 1099-DA for a sale of $50,000. Because they didn't receive the acquisition information, they may report the cost basis as missing.
The result:
- If you rely on the form and don’t find the missing cost basis: You may report a $50,000 gain. Tax liability (assuming 20% rate): $10,000.
- The Truth: The gain is ($50,000 - $30,000) = $20,000. Tax liability: $4,000.
By relying on the form alone, the client overpays by $6,000.
What a 1099-DA ready crypto workflow looks like
To survive this new regulatory era, firms must treat 1099-DA as an input, not the final answer. You need crypto tax software aka a unified system that ingests all data sources.
Here is the modern workflow for a defensible crypto tax return:
- Talk to your clients early and identify who has crypto in advance of the tax season
- Review client organizers for 1099-DA or crypto and review answers to 1040 digital asset question.
- Obtain 1099-DAs from all US brokers the client was active in.
- Inquire about use of non-US exchanges (ByBit, KuCoin) and self-custody / DeFi.
- Connect all APIs, addresses and exchange CSVs
- Reconcile 1099-DAs to crypto software.
In conclusion
The 1099-DA is a milestone for crypto adoption, bringing digital assets into the fold of traditional finance. However, for the tax professional, it introduces a new layer of complexity. It provides visibility, but it does not remove the need for rigorous accounting.
If your firm blindly files based on these forms, you may risk significant errors in cost basis. The only path forward is a hybrid approach: respecting the regulatory forms while verifying them with immutable on-chain data.
