Form 1099-DA is the IRS’s new information return that requires crypto brokers to report digital asset sales directly to the IRS, starting with transactions made on or after January 1, 2025. For crypto businesses, this means exchanges and custodial platforms will now send both you and the IRS detailed records of your crypto sales, similar to how stock brokers report trades on Form 1099-B. If you haven’t received your first 1099-DA yet, expect it by February 2026 for your 2025 transactions.
This guide breaks down everything your crypto business needs to know about Form 1099-DA compliance, including what’s reported, the timeline for cost basis requirements, how the DeFi broker rule repeal affects you, and practical steps to reconcile your records before filing.
Need help preparing for 1099-DA compliance? Fortress Accounting specializes in crypto tax compliance for Web3 businesses. Book a free consultation to review your reporting obligations.
What Is Form 1099-DA and Why Does It Matter?
Form 1099-DA (Digital Asset Proceeds from Broker Transactions) is the IRS’s standardized form for reporting cryptocurrency and digital asset sales. It was created under Section 80603 of the Infrastructure Investment and Jobs Act (IIJA), signed into law in late 2021, and the final regulations were issued by Treasury and the IRS in 2024.
Before Form 1099-DA, crypto exchanges weren’t required to report your trading activity to the IRS in a standardized way. Some platforms issued 1099-MISC or 1099-K forms inconsistently, leading to confusion and making it easier for taxpayers to underreport crypto income. The IRS estimates that billions of dollars in crypto gains have gone unreported.
Form 1099-DA changes this by requiring custodial brokers to report:
- Gross proceeds from each digital asset sale or exchange
- Date of the transaction
- Type of digital asset sold
- Cost basis (starting with 2026 transactions for covered securities)
- Gain or loss classification (short-term vs. long-term)
The bottom line: the IRS now has direct visibility into your crypto trading activity. If you sell crypto through a custodial exchange, that information is being reported to the government whether you report it on your tax return or not.
Who Receives Form 1099-DA?
Form 1099-DA is issued by digital asset brokers to their customers. Under the IRS regulations, a “broker” includes:
- Centralized exchanges (Coinbase, Kraken, Gemini, Binance.US, etc.)
- Custodial wallet providers that facilitate sales
- Digital asset kiosks (Bitcoin ATMs)
- Certain payment processors (PDAPs) that process digital asset payments
Important: If your crypto business operates through centralized exchanges for buying, selling, or converting crypto, you will receive Form 1099-DA for transactions occurring in 2025 and beyond. The forms will be sent to both you and the IRS.
Form 1099-DA Reporting Timeline: What’s Required and When
The IRS is phasing in 1099-DA requirements over multiple years. Here’s the timeline your crypto business needs to understand:
| Tax Year | What Brokers Must Report | When You’ll Receive It |
|---|---|---|
| 2025 | Gross proceeds only (cost basis optional) | By February 2026 |
| 2026 | Gross proceeds AND cost basis for covered securities | By February 2027 |
| 2027+ | Full reporting including backup withholding enforcement | By February 2028+ |
2025 Transactions (Reported in 2026)
For tax year 2025, brokers are required to report only gross proceeds—the total amount you received from selling digital assets. Cost basis reporting is optional for 2025 transactions.
What this means for you: Your 1099-DA for 2025 will show how much you sold crypto for, but it may not show your cost basis or calculate your gain/loss. You’re still responsible for tracking your own cost basis and reporting accurate gains or losses on your tax return.
Good faith relief: The IRS has announced in Notice 2024-56 that it will not impose penalties on brokers who make good faith efforts to comply with 1099-DA filing for 2025 transactions, even if forms contain errors. However, this relief is for brokers—not for taxpayers who underreport.
2026 Transactions (Reported in 2027)
Starting January 1, 2026, the requirements expand significantly. Brokers must report both gross proceeds AND cost basis for “covered securities”—digital assets that the customer acquired from and held with the same broker on or after January 1, 2026.
Covered securities are digital assets where the broker has the acquisition information because you purchased them through that broker after January 1, 2026.
Noncovered securities are digital assets acquired before 2026 or transferred in from another wallet/exchange. For these, brokers may voluntarily report basis but are not required to.
DeFi Broker Rule Repeal: What It Means for Your Business
On April 10, 2025, President Trump signed legislation repealing the IRS’s “DeFi Broker Rule.” This rule, finalized in December 2024 under the Biden administration, would have required decentralized finance (DeFi) platforms to collect user information and report transactions on Form 1099-DA starting in 2027.
Congress used the Congressional Review Act (CRA) to overturn the rule with bipartisan support—the Senate voted 70-27 and the House voted 292-132 in favor of repeal. This was the first cryptocurrency-related bill ever signed into law.
What the DeFi Repeal Changes
- DeFi platforms are NOT brokers: Decentralized exchanges, automated market makers (AMMs), and DeFi front-ends will not be required to issue 1099-DA forms or collect KYC information.
- Your DeFi activity won’t be reported: Swaps on Uniswap, liquidity pool transactions, and similar DeFi activities won’t generate 1099-DA forms.
- You’re still responsible: Even though DeFi platforms won’t report your activity, you must still report all taxable transactions on your return. The IRS can use blockchain analytics to identify unreported DeFi income.
What Stays the Same
- Centralized exchanges still report: Coinbase, Kraken, Gemini, and other custodial platforms remain subject to 1099-DA requirements.
- Payment processors still report: Entities that regularly issue and redeem tokens or process digital asset payments are still brokers.
- CRA prevents re-regulation: Under the Congressional Review Act, the IRS cannot issue “substantially the same” rule unless specifically authorized by new legislation.
How to Reconcile Form 1099-DA with Your Business Records
Receiving a 1099-DA doesn’t mean your tax work is done—it means it’s just beginning. Here’s how to reconcile the form with your actual records:
Step 1: Compare Gross Proceeds
Match the gross proceeds reported on your 1099-DA against your own transaction records. Common discrepancies include:
- Proceeds reported on a different date than you expected (exchanges may use settlement date vs. trade date)
- Fees deducted from proceeds (check Box 3a to see if gross or net proceeds are reported)
- Multiple 1099-DAs for a single transaction if assets were acquired at different times
Step 2: Verify or Calculate Cost Basis
For 2025 transactions, Box 1g (cost basis) may be blank. If so, you must calculate basis from your own records. For 2026+ covered securities, verify the broker’s basis calculation matches your records.
Key point: If you transferred crypto into the exchange from an external wallet, the broker won’t have your original cost basis. You’ll need to track this yourself and may need to report an adjustment on Form 8949.
Step 3: Identify Missing Transactions
Your 1099-DA only covers transactions made through that specific broker. You still need to report:
- DeFi swaps and transactions (not covered by 1099-DA after the broker rule repeal)
- Peer-to-peer sales
- NFT sales on non-custodial marketplaces
- Crypto received as payment for goods or services
Step 4: Report on Form 8949 and Schedule D
Use Form 8949 to report individual crypto sales and exchanges. If the cost basis was reported to the IRS (Box 2 checked on 1099-DA), you may be able to report summary totals directly on Schedule D. Otherwise, list each transaction on Form 8949 with appropriate adjustments.
Common 1099-DA Compliance Mistakes to Avoid
- Assuming 1099-DA covers all your crypto activity. It only covers custodial broker transactions. DeFi, peer-to-peer, and non-custodial activity must be tracked separately.
- Ignoring transferred-in assets. If you moved crypto from a hardware wallet to an exchange and then sold, the broker doesn’t know your original cost basis. You must track and report this yourself.
- Missing late-issued 1099-DAs. Some brokers operating under good-faith relief may issue 1099-DAs after the April filing deadline. File an amended return if necessary.
- Not reconciling across multiple exchanges. If you use multiple platforms, you’ll receive multiple 1099-DAs. Ensure you’re reporting all of them and not double-counting.
- Ignoring the IRS matching process. The IRS will match your 1099-DA data to your tax return. Discrepancies trigger CP2000 notices and potential audits.
Frequently Asked Questions About Form 1099-DA
What is Form 1099-DA and who sends it?
Form 1099-DA is the IRS’s information return for reporting digital asset sales. It’s sent by custodial crypto brokers—such as centralized exchanges like Coinbase, Kraken, and Gemini—to both the taxpayer and the IRS. Starting with 2025 transactions, brokers must report gross proceeds from digital asset sales on this form.
When did Form 1099-DA reporting requirements begin?
Form 1099-DA reporting began for transactions occurring on or after January 1, 2025. Brokers issued the first 1099-DA forms in early 2026 for 2025 tax year transactions. Cost basis reporting becomes mandatory for covered securities starting with transactions in 2026.
What crypto transactions are reported on Form 1099-DA?
Form 1099-DA reports sales and exchanges of digital assets facilitated by custodial brokers. This includes selling crypto for cash, exchanging one crypto for another on a centralized exchange, and using crypto to purchase goods or services through a broker. DeFi transactions, peer-to-peer sales, and non-custodial activity are not reported after the DeFi broker rule repeal.
How do I reconcile Form 1099-DA with my business records?
Compare the gross proceeds on your 1099-DA to your transaction records. Verify or calculate cost basis if not provided. Identify transactions not covered by 1099-DA (DeFi, P2P, etc.) and ensure they’re also reported. Report all transactions on Form 8949 and Schedule D, making adjustments for any discrepancies between broker-reported and actual figures.
Does the DeFi broker rule repeal affect my business?
If your business uses DeFi protocols (decentralized exchanges, liquidity pools, yield farming), you won’t receive 1099-DA forms for those transactions. However, you’re still legally required to report all DeFi income and gains on your tax return. Centralized exchange transactions remain subject to 1099-DA reporting regardless of the DeFi rule repeal.
Prepare Your Crypto Business for 1099-DA Compliance
Form 1099-DA represents a fundamental shift in crypto tax enforcement. The IRS now has standardized, machine-readable data on millions of crypto transactions. For crypto businesses, this means the era of ambiguity is over—accurate record-keeping and proactive compliance are no longer optional.
The key takeaways for your business:
- Expect 1099-DA forms from all custodial exchanges you used in 2025
- Track DeFi and non-custodial transactions yourself—they’re still taxable
- Reconcile 1099-DA data with your records before filing
- Prepare for expanded cost basis reporting starting in 2026
Don’t Navigate Crypto Tax Compliance Alone
Fortress Accounting helps crypto and Web3 businesses stay compliant with IRS reporting requirements. Our team specializes in Form 1099-DA reconciliation, crypto bookkeeping, and tax planning.
