Key Takeaways:
- Form 1099-DA standardizes crypto reporting for transactions starting in 2025, covering cryptocurrencies, NFTs, stablecoins, and other digital assets.
- Each transaction is reported in detail, including date, type of asset, fair market value, cost basis, gains/losses, wallet/account info, and broker identity.
- Brokers, exchanges, and some platforms issue it, while recipients include traders, NFT buyers/sellers, miners, and stakers receiving rewards.
- Real estate transactions using digital assets report the fair market value on Form 1099-S, aligning property deals with IRS rules.
- Key challenges for taxpayers include missing cost basis, manual reconciliation, offshore exchanges, and higher audit visibility.
- Get ahead by preparing now: organize transaction data, track cost basis, and consult a qualified tax professional to ensure compliance.
The tax landscape for digital assets is rapidly changing, and at the center of that change is a brand-new reporting form: Form 1099-DA. If you’ve traded cryptocurrencies, purchased an NFT, or even experimented with stablecoins, you’ll soon be hearing a lot about this form. Investors and brokers alike need to understand what it is, why it matters, and how it could impact future tax filings. This comprehensive guide explains everything you need to know about Form 1099-DA, from its purpose and rollout timeline to its impact on taxpayers, brokers, and the broader crypto market.
How Crypto Taxes Are Reported Before 1099-DA
Before the first Form 1099-DA is sent out in 2026, taxpayers must still report their crypto activity, but the process is more fragmented. Here’s how it currently works:
- Form 1040: The IRS now asks a yes/no digital asset question on the main form, requiring taxpayers to disclose whether they engaged in any crypto transactions during the year.
- Schedule D: Used to summarize overall capital gains and losses, including those from digital assets.
- Form 8949: Used to detail each individual transaction (date acquired, date sold, proceeds, cost basis, gain/loss).
Without a 1099-DA, crypto users often rely on personal record-keeping, exchange downloads, or third-party tax software to reconstruct their taxable activity. This creates a compliance gap that the IRS hopes 1099-DA will fill.
What Is Form 1099-DA?
Before diving into the technicalities, it’s important to start with the basics. Form 1099-DA is the Internal Revenue Service’s first form designed specifically for digital asset reporting.
Definition and Purpose
Form 1099-DA stands for “Digital Asset Proceeds from Broker Transactions.” It is a tax form that brokers and exchanges will be required to issue starting with the 2025 tax year (for transactions beginning January 1, 2025). Just like the traditional Form 1099-B used for stocks and bonds, this new document standardizes how digital asset sales, trades, and exchanges are reported.
The IRS created Form 1099-DA to replace the confusing patchwork of previous forms like 1099-K or 1099-MISC, which some platforms used inconsistently. By introducing a tailored reporting system, the IRS aims to make crypto taxation more transparent and harder to avoid.
What Counts as a “Digital Asset”?
The term “digital asset” is broad and covers much more than Bitcoin or Ethereum. Under current IRS definitions, Form 1099-DA applies to:
- Cryptocurrencies such as Bitcoin, Ethereum, or Solana.
- Stablecoins like USDC or Tether.
- Non-fungible tokens (NFTs).
- Other blockchain-based tokens used for payments, transfers, or trading.
If you sell, trade, or exchange any of these, a broker may report that transaction on Form 1099-DA.
Why Did the IRS Introduce Form 1099-DA?
The introduction of Form 1099-DA in 2025 isn’t just about paperwork. The main goal of Form 1099-DA is to close a gap in U.S. tax enforcement.
Inconsistent Reporting in the Past
Until now, digital asset reporting was inconsistent. Some exchanges issued 1099-K forms, which often overstated taxable income by reporting the gross value of transactions without accounting for cost basis. Others issued 1099-MISC for staking rewards, while many didn’t issue anything at all.
This inconsistency left taxpayers confused and often led to underreporting or misreporting crypto gains. Unlike stock traders who rely on Form 1099-B, crypto investors had no standard tool.
Improving Compliance and Transparency
The IRS recognized that billions in potential tax revenue were being lost due to crypto’s anonymity and lack of standardized reporting. With Form 1099-DA, the IRS will receive clear, consistent data directly from brokers, making it easier to cross-check returns and spot discrepancies.
For example, if you sold Ethereum worth $20,000 through a major U.S. exchange, that broker will report the transaction details on Form 1099-DA. If you fail to report the same gain on your tax return, the IRS will have the data to flag the omission.
Transaction-level Detail
One of the most significant updates with Form 1099-DA is the requirement for transaction-level reporting. This means the form won’t just summarize annual totals. It will capture each taxable event separately. For every sale, trade, or transfer, the broker must provide details such as the date, type of asset, fair market value at the time of the transaction, cost basis, and resulting gain or loss.
This level of granularity brings crypto into alignment with how stock sales are reported on Form 1099-B. It reduces guesswork for taxpayers and gives the IRS a clearer view of individual trades rather than broad, potentially misleading totals.
Key Features of Form 1099-DA
Understanding the unique features of Form 1099-DA is essential for taxpayers and brokers alike.
What Information Does Form 1099-DA Contain?
Form 1099-DA is expected to include:
- Type of digital asset (e.g., Bitcoin, Ethereum, NFT).
- Date acquired and date sold/disposed of.
- Gross proceeds from the sale or exchange.
- Cost basis (purchase price plus certain fees, if known).
- Gain or loss calculation.
- Wallet or account information used for the transaction.
- Transaction ID or hash for blockchain reference.
- Broker/exchange name and information.
This mirrors the level of detail stock investors are accustomed to with Form 1099-B, but tailored for digital assets.
Transactions That Must Be Reported
Starting in 2025, brokers will need to report:
- Sales of cryptocurrencies on exchanges.
- Conversions of one digital asset into another (e.g., swapping Bitcoin for Ethereum).
- Using digital assets for payments when facilitated through a broker.
There is no minimum threshold for reporting. This means even small trades must be included.
Temporary Exemptions
Not all digital asset activities fall under the new rules immediately. Certain decentralized finance (DeFi) transactions, like staking, lending, providing liquidity, or wrapping/unwrapping tokens, are excluded from reporting until at least 2027 or 2028. This phased rollout gives regulators time to evaluate how best to capture more complex DeFi activity without overwhelming the system.
Who Must Issue and Who Must Receive It?
Now that you know what the form contains, let’s look at who’s responsible for issuing it and who should expect to receive it.
Issuers: Digital Asset Brokers
Under IRS rules, a broker is anyone who facilitates the sale or exchange of digital assets while verifying customer identities. This includes:
- Centralized exchanges like Coinbase, Kraken, or Gemini.
- Hosted wallet providers that manage customer accounts.
- Payment processors that handle crypto transactions.
Brokers will be legally obligated to provide Form 1099-DA to both the IRS and their customers.
Exempt Parties
Not every player in the digital asset ecosystem qualifies as a broker. Entities that are generally exempt include:
- Miners or validators who maintain blockchain networks.
- Software developers or smart contract creators.
- Node operators who don’t directly facilitate trades.
Recipients: Taxpayers Who Trade or Sell Crypto
If you’ve engaged in taxable digital asset activity through a broker or exchange, you’re likely to receive Form 1099-DA. This includes:
- Buyers and sellers of cryptocurrency on centralized exchanges.
- NFT traders who purchase or sell through platforms.
- Users converting one digital asset to another (e.g., exchanging ETH for BTC).
- Miners and stakers who receive digital assets as rewards. Even though mining and staking rewards are taxed as ordinary income at the time of receipt, brokers or platforms facilitating such transactions may issue 1099-DA forms to report them.
For example, if you sold 2 ETH on Coinbase in 2025, you’d likely receive a 1099-DA from Coinbase showing the proceeds, acquisition cost (if available), and any gain or loss. Similarly, if you staked ADA and received rewards, you may also see that activity reported.
Form 1099-DA and Real Estate Transactions
Digital assets are increasingly being used in real estate deals, and the IRS wants clarity here too. Currently, real estate transactions are reported on Form 1099-S, which captures the gross proceeds of a sale.
When digital assets are involved, say, using Bitcoin to purchase property, the fair market value (FMV) of the crypto on the transaction date is treated as the proceeds. For example, if you bought a home using 5 BTC valued at $250,000, the seller may need to report $250,000 on Form 1099-S, while you recognize the disposition of 5 BTC on your taxes. Form 1099-DA may eventually help bridge reporting when digital assets are exchanged for real property, ensuring both sides of the deal are properly documented.
Reporting Timeline
The rollout of Form 1099-DA is being carefully staged to give both brokers and taxpayers time to adapt.
Key Dates to Know
- January 1, 2025: Brokers must begin tracking all reportable digital asset transactions.
- Early 2026: First wave of Form 1099-DA documents issued to taxpayers for 2025 transactions.
- 2027: Expanded rules expected to capture additional DeFi activities facilitated through broker-like front-end providers.
- 2028: Backup withholding requirements kick in for certain digital asset transactions.
What This Means for You
If you traded digital assets in 2024 or earlier, you won’t receive Form 1099-DA for those years. But starting in 2025, every reportable transaction will be on record. This means the IRS will be able to more easily enforce crypto tax compliance.
Impact on Taxpayers and Brokers
The arrival of Form 1099-DA will change how both taxpayers and brokers approach digital asset transactions.
Impact on Taxpayers
For investors, Form 1099-DA should make it easier to calculate capital gains and losses, but there are still challenges:
- You’ll still need to file Form 8949 and Schedule D to report gains and losses on your 1040.
- Cost basis may not always transfer correctly between exchanges, meaning you may need to manually track certain data.
- Taxpayers with large trading histories may face reconciliations if pre-2025 data is incomplete.
Let’s look at an example. Suppose you bought Bitcoin in 2022 on one exchange and transferred it to another in 2024. If you sell it in 2025, the broker may not know your original purchase price. You’ll need your own records to ensure the reported gain is accurate.
Impact on Brokers
For brokers, the impact is even larger. They must build systems to collect and report transaction data, often across millions of trades. Failure to comply could lead to hefty IRS penalties. That said, the IRS has promised “good faith” relief during the transition. If a broker makes reasonable efforts to comply, penalties may be reduced in the early years.
Challenges and Practical Considerations
While Form 1099-DA improves transparency, it also raises new issues for taxpayers.
Cost Basis Gaps
Transfers between wallets and exchanges often obscure cost basis. If your exchange doesn’t have acquisition data, you could be taxed as though your entire proceeds were gains, unless you provide accurate records.
Accounting Method Changes
The IRS is requiring a move from “universal accounting” to wallet-by-wallet accounting for pre-2025 holdings. To help taxpayers transition, Revenue Procedure 2024-28 allows safe harbor methods like “specific unit” or “global allocation” for calculating basis, but elections must be made by December 31, 2024.
Increased Audit Risk
With standardized reporting, the IRS will be better equipped to detect mismatches. Investors who haven’t fully reported crypto activity in past years could face higher audit risk for cryptocurrencies and other digital assets once the IRS starts receiving 1099-DA data.
Foreign Exchanges
Not all exchanges are U.S.-based. If you trade through an offshore platform that doesn’t issue Form 1099-DA, you’re still responsible for reporting. In fact, mismatches between self-reported gains and IRS data could draw additional scrutiny.
Preparing for the 1099-DA Era
The best way to navigate this change is to prepare now—whether you’re an investor or a broker.
Steps for Taxpayers
- Organize transaction history: Export data from every exchange and wallet you’ve used.
- Track cost basis: Use crypto tax software or spreadsheets to record acquisition prices and dates.
- Consider amending past returns: If you’ve underreported in the past, amending now could reduce penalties before the IRS has detailed 1099-DA data.
- Seek professional advice: A tax professional experienced in crypto can help you prepare for new compliance standards.
Steps for Brokers
- Upgrade reporting systems: Ensure platforms can track acquisition dates, sales, and fair market values.
- Work with legal counsel: Clarify whether your business qualifies as a broker under IRS rules.
- Plan for phased rollout: Anticipate DeFi reporting requirements and backup withholding rules coming in 2027 and 2028.
Frequently Asked Questions
What is Form 1099-DA used for?
Form 1099-DA is used to report digital asset transactions, including sales, trades, and conversions, to both the IRS and taxpayers. It helps ensure accurate reporting of cryptocurrency, NFT, stablecoin, and other blockchain-based transactions.
What is the minimum amount for a 1099-DA?
There is no minimum transaction threshold for Form 1099-DA. Brokers must report all transactions that result in gains or losses, regardless of the amount.
Who is required to issue a 1099-DA?
Digital asset brokers, exchanges, hosted wallet providers, and certain payment processors that facilitate transactions and verify customer identities are required to issue Form 1099-DA.
What is the difference between a 1099-B and a 1099-DA?
Form 1099-B reports sales of stocks, bonds, and traditional securities, while Form 1099-DA is specifically for digital asset transactions. Both forms provide transaction-level detail, but 1099-DA is tailored to cryptocurrencies, NFTs, stablecoins, and blockchain-based assets.
Can the IRS track crypto?
Yes, the IRS can track cryptocurrency transactions through broker reports, blockchain analytics, and Forms 1099-DA, 1099-K, or 1099-B. Accurate reporting is essential to avoid audits and penalties.
What triggers IRS audit crypto?
Common triggers include unreported gains, missing cost basis, large or frequent transactions, offshore exchanges, or discrepancies between taxpayer records and broker-reported forms like 1099-DA.
Do miners and stakers receive 1099-DA forms?
Yes, miners and stakers may receive 1099-DA if their digital asset rewards are facilitated through a broker or platform. Mining and staking income is generally taxed as ordinary income at the time of receipt.
How do I report crypto gains before 2025?
Before Form 1099-DA, report crypto gains and losses using Form 1040 (digital asset question), Schedule D for total gains/losses, and Form 8949 to detail each transaction.
Are NFT sales included on Form 1099-DA?
Yes, NFT transactions conducted through brokers or exchanges are reportable on Form 1099-DA, including purchases, sales, and trades.
What happens if I don’t receive a 1099-DA?
Even if you don’t receive a 1099-DA, you are responsible for reporting all taxable digital asset transactions. Accurate record-keeping and consultation with a tax professional help ensure compliance.
Tax Help for Investors
Form 1099-DA is more than just another tax form. It’s a turning point in the U.S. government’s regulation of digital assets. By standardizing reporting, the IRS aims to reduce underreporting, simplify compliance, and bring crypto into alignment with traditional investments. For taxpayers, it means greater transparency but also greater responsibility to maintain accurate records. For brokers, it means building new systems and processes that can handle millions of detailed reports. Because the rules are complex and the rollout is phased, it’s always wise to consult a qualified tax professional. They can help you interpret IRS guidance, ensure you’re filing correctly, and protect you from unexpected penalties as digital asset reporting becomes more rigorous. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.
If You Need Tax Help, Contact Us Today for a Free Consultation