A new era of cryptocurrency tax reporting has arrived in the United States. Starting with the 2025 tax year, crypto investors will begin receiving a new tax form, IRS Form 1099-DA, from their exchanges and brokers. This form marks a significant shift, moving from a purely self-reporting system to one where brokers provide transaction data directly to the IRS, similar to traditional stock trading.

The New Era of Crypto Tax Reporting: Understanding Form 1099-DA

For years, the responsibility for tracking and reporting every crypto transaction fell solely on the taxpayer. This manual process was often complex and prone to errors. The introduction of Form 1099-DA, mandated by the Infrastructure Investment and Jobs Act (IIJA) of 2021, aims to streamline this process and increase tax compliance. This change amends the Internal Revenue Code (IRC) §6045 broker reporting rules to explicitly include digital assets.

While this new reporting may seem daunting, it's designed to ultimately simplify tax filing for many investors. However, understanding what this form contains, who issues it, and what it means for your tax obligations is crucial for a smooth transition.

What is Form 1099-DA and Why Does It Exist?

Form 1099-DA, "Digital Asset Proceeds from Broker Transactions," is an IRS information return used by brokers to report the gross proceeds from the sales of digital assets. Think of it as the crypto equivalent of Form 1099-B, which is used for reporting proceeds from stock and securities sales.

The primary purpose of this form is to provide both the taxpayer and the IRS with information about a taxpayer's digital asset sales during the year. This helps the IRS verify that income from crypto transactions is being reported correctly. For taxpayers, it provides a summary of sales from a specific platform, which can be used to complete Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D (Capital Gains and Losses, totals from Form 8949).

According to the final regulations (TD 10000) published on July 9, 2024, the form will include key information such as:

Gross proceeds from sales (Box 1f)
Cost or other basis (Box 1g) for certain transactions
Acquisition and disposition dates
Name and number of units sold

This increased transparency is intended to close the "tax gap"—the difference between taxes owed and taxes paid—which the Treasury Department believes is significant in the digital asset space.

The 1099-DA Rollout: Key Dates and Requirements

The IRS is implementing the new reporting requirements in phases to give brokers and taxpayers time to adapt. Understanding this timeline is essential for knowing what to expect on your tax forms and when.

Tax Year	Broker Reporting Requirement	Key Form	What Taxpayers Will Receive
2024 & Prior	None (Pre-1099-DA regime)	N/A	Taxpayers self-report all transactions on Form 8949 using their own records.
2025	Gross Proceeds Reporting	Form 1099-DA	In early 2026, you will receive a 1099-DA showing total sales proceeds from each broker. You are still responsible for calculating the cost basis for all sales.
2026 & Beyond	Gross Proceeds and Cost Basis Reporting	Form 1099-DA	In early 2027, your 1099-DA will include proceeds and, for covered securities (assets acquired at and sold from the same broker), the cost basis.

The most significant change begins with the 2025 tax year, for which brokers must report gross proceeds. The second phase, starting in tax year 2026, requires brokers to also report cost basis information for "covered securities." Digital assets acquired in a user's account at a brokerage on or after January 1, 2026, are considered covered. Assets held before that date or transferred in from an external wallet are "noncovered," and brokers are not required to report their basis, though they may do so voluntarily.

Who is a "Broker"? Understanding Who Must Report to the IRS

The IIJA provides a broad definition of a "broker," which has been a source of much discussion. According to the final regulations, a broker includes "any person who, in the ordinary course of a trade or business, stands ready to effect sales of digital assets to be made by others."

This definition primarily targets centralized, custodial entities. The IRS has clarified that the rules apply to:

Centralized Crypto Exchanges: Platforms like Coinbase, Kraken, and Binance.US that hold custody of user assets.
Custodial Wallet Providers: Certain hosted wallet providers that have control over user assets.
Digital Asset Payment Processors (PDAPs): Services that facilitate payments using crypto.
Crypto Kiosks and ATMs: Operators of machines that allow users to buy or sell digital assets for cash.

Importantly, the final regulations do not currently impose reporting requirements on decentralized finance (DeFi) participants, such as non-custodial wallet developers, liquidity pool operators, or protocol governance token holders. The Treasury and IRS have stated their intention to provide separate rules for these "non-custodial brokers" in the future.

IRS Transitional Relief: What Notices 2024-56 & 2025-33 Mean for You

Recognizing the technical challenges brokers face in implementing these new systems, the IRS has issued several notices providing transitional relief. These notices are designed to prevent penalties for brokers who are making good-faith efforts to comply.

Notice 2024-56 (July 15, 2024): This initial notice established that the IRS will not impose penalties under sections 6721 and 6722 for failures to file or furnish correct Forms 1099-DA for the 2025 calendar year, provided the broker makes a "good faith effort" to comply.
Notice 2025-33: This subsequent notice extended the penalty relief from Notice 2024-56 for an additional year, covering the 2026 tax year as well.

This relief means that while reporting is mandatory, the IRS is allowing a grace period for the industry to build and refine the necessary infrastructure. For taxpayers, this may mean that the initial Forms 1099-DA you receive could have inconsistencies, reinforcing the need to maintain your own accurate records.

Understanding Backup Withholding and Why the IRS Is Delaying It

A key component of broker reporting is backup withholding. Under IRC §3406, if a user fails to provide a correct Taxpayer Identification Number (TIN), such as a Social Security Number, the broker is required to withhold tax from their sales proceeds. The current backup withholding rate is 24%.

This could be a major issue in the crypto space, where users may be accustomed to a higher degree of privacy. To ease the transition, the IRS has provided significant relief from backup withholding obligations:

For 2025: Brokers are granted relief from backup withholding obligations for all digital asset sales.
For 2026: Relief is extended for transactions where the broker has obtained the customer's TIN and successfully verified it through the IRS's TIN Matching Program.

This phased approach gives brokers more time to collect and validate customer information without having to immediately withhold a significant portion of their users' funds.

Transactions Temporarily Exempt from Broker Reporting (Notice 2024-57)

The complexity of DeFi and other advanced crypto transactions presents unique reporting challenges. In Notice 2024-57, the IRS acknowledged this by temporarily exempting brokers from reporting on certain types of transactions until further guidance is issued.

The following transactions are currently not required to be reported on Form 1099-DA:

Wrapping and unwrapping transactions (e.g., converting ETH to WETH).
Transactions involving liquidity pool tokens.
Staking transactions.
Transactions described as digital asset "lending" or "short sales."
Notional principal contracts involving digital assets.

Crucially, this exemption only applies to broker reporting. Taxpayers are still fully responsible for tracking and reporting the income and capital gains from these activities on their own tax returns. For example, while a broker doesn't have to report a staking transaction, the staking rewards you receive are still ordinary income under Rev. Rul. 2023-14 and must be reported. This is where a robust crypto tax software like dTax becomes invaluable, as its AI-assisted classification can help identify and correctly categorize these complex DeFi transactions that won't appear on a 1099-DA.

How to Prepare for the New 1099-DA Regime

Even with broker reporting, the ultimate responsibility for an accurate tax return lies with you. Here’s how you can prepare:

Consolidate Your Records: Don't wait for your 1099-DA forms to arrive in 2026. Start organizing your transaction history from all your wallets and exchanges now. This includes on-chain activity and transactions on platforms that won't issue a 1099-DA.
Verify Your Information: Ensure your personal information (name, address, TIN) on each exchange is accurate to avoid backup withholding issues in the future.
Understand "Noncovered" Assets: Your 1099-DA will likely not include cost basis for assets you transferred into an exchange. You will need to provide this information yourself. This requires meticulous record-keeping of when and at what price you originally acquired those assets.
Use a Dedicated Crypto Tax Tool: The new rules make crypto tax software more important than ever. A platform like dTax can aggregate data from all your sources—centralized exchanges, DeFi protocols, and self-custody wallets—to create a complete picture. It can help you reconcile the data on your 1099-DA forms with your complete transaction history, calculate basis for noncovered assets, and generate the final Form 8949 you need to file.

The introduction of Form 1099-DA is a major step towards integrating digital assets into the traditional financial system. While it introduces new complexities, it also presents an opportunity for investors to get their tax reporting in order with greater clarity from their service providers.

This content is for informational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional for your specific situation.

By staying informed and using the right tools, you can navigate this new landscape with confidence. The era of comprehensive broker reporting is here, and preparation is key. Start automating your crypto taxes with dTax.

Frequently Asked Questions

What should I do if the information on my Form 1099-DA is incorrect?

If you receive a Form 1099-DA with incorrect information, such as wrong gross proceeds, you should first contact the issuing broker to request a corrected form. However, you are ultimately responsible for reporting the correct figures on your tax return. You should file using your own accurate records and be prepared to explain the discrepancy to the IRS if questioned. Tools like dTax help you maintain an independent, accurate record of all your transactions to easily spot and correct these errors.

Will I receive a Form 1099-DA for my DeFi or self-custody wallet activity?

No. The current regulations for Form 1099-DA apply to "brokers," which are primarily centralized, custodial entities. Activity in your self-custody wallet (e.g., MetaMask) or on decentralized exchanges (DEXs) will not be reported on a 1099-DA. You remain solely responsible for tracking the cost basis, acquisition dates, and sale proceeds for all of these transactions and reporting them on Form 8949.

If my broker reports my cost basis starting in 2026, do I still need to track it myself?

Yes. Brokers are only required to report cost basis for "covered" digital assets—those acquired in your account at that specific broker on or after January 1, 2026. For any crypto you bought before that date or any assets you transfer in from an external wallet or another exchange ("noncovered" assets), the broker is not required to report the basis. You will need to provide this information yourself, making it essential to continue tracking your acquisition costs across all platforms.