1099-DA Crypto Explained: The New IRS Form for Digital Asset Reporting

Form 1099-DA is the new IRS form that crypto brokers use to report digital asset transactions. Centralized exchanges like Coinbase, Kraken, and Gemini began issuing 1099-DA forms for tax year 2025, reporting gross proceeds and, for covered securities, cost basis. DeFi platforms are exempt from broker reporting after Congress repealed the DeFi broker rule in April 2025.

What Is Form 1099-DA?

The IRS introduced Form 1099-DA (Digital Asset Proceeds from Broker Transactions) as part of the Infrastructure Investment and Jobs Act of 2021 (Public Law 117-58). This law expanded the definition of "broker" under IRC Section 6045 to include entities that regularly provide services effectuating transfers of digital assets.

Before 1099-DA, crypto reporting was inconsistent. Some exchanges issued 1099-K forms (which report gross payment volume, not gains or losses), while others issued 1099-B forms or nothing at all. According to a 2023 Government Accountability Office (GAO) report, the IRS estimated that crypto tax noncompliance resulted in approximately $1.5 billion in unreported income annually.

Form 1099-DA standardizes digital asset reporting with fields specifically designed for cryptocurrency transactions.

What Information Does 1099-DA Report?

Each 1099-DA form reports the following for every disposal event (sale, exchange, or transfer):

Gross Proceeds: The total amount received from the sale or exchange, reported in U.S. dollars at the time of the transaction. This includes crypto-to-crypto trades, where the fair market value of the received asset is the gross proceeds.

Cost Basis (for covered securities only): The original purchase price of the asset, including any fees. This field is only required for "covered securities," which are assets purchased on the same exchange after January 1, 2026.

Date of Acquisition: When the asset was originally purchased or received.

Date of Sale or Disposition: When the asset was sold, exchanged, or otherwise disposed of.

Gain or Loss (for covered securities): The calculated difference between proceeds and cost basis. This field may be left blank for noncovered securities.

Digital Asset Type: The specific cryptocurrency involved (e.g., BTC, ETH, SOL).

Transaction ID: A unique hash or identifier for the blockchain transaction, when available.

Covered vs. Noncovered Securities: A Critical Distinction

The distinction between covered and noncovered securities is one of the most important concepts in 1099-DA reporting, and one that causes the most confusion.

Covered Securities

A digital asset is considered a "covered security" if it was purchased on a centralized exchange on or after January 1, 2026. For covered securities, the exchange is required to report both gross proceeds AND cost basis to the IRS.

This means the IRS will have a complete picture of your gain or loss. If you report a different figure on your tax return, the IRS matching system will flag the discrepancy, similar to how W-2 wage mismatches are detected.

According to IRS Notice 2024-56, exchanges must track cost basis using the First-In, First-Out (FIFO) method as the default, unless the taxpayer specifies a different method (such as Specific Identification) before the transaction occurs.

Noncovered Securities

A digital asset is "noncovered" if it was:

Purchased before January 1, 2026 (regardless of the exchange)
Transferred in from another exchange or wallet
Received through mining, staking, airdrops, or forks
Acquired through DeFi protocols

For noncovered securities, the exchange reports only gross proceeds. The cost basis field will be blank on the 1099-DA, and the taxpayer bears full responsibility for calculating and reporting the correct cost basis on Form 8949.

The IRS estimates that for tax year 2026, approximately 60-70% of all crypto dispositions will involve noncovered securities, since most investors purchased their holdings before the January 1, 2026 cutoff date.

Why This Matters for Your Tax Return

When you file Form 8949, you must indicate whether each transaction involves a covered or noncovered security using the box categories:

Box A: Short-term, covered (basis reported to IRS)
Box B: Short-term, noncovered (basis NOT reported to IRS)
Box C: Short-term, no 1099 received
Box D: Long-term, covered (basis reported to IRS)
Box E: Long-term, noncovered (basis NOT reported to IRS)
Box F: Long-term, no 1099 received

Filing in the wrong box can trigger an IRS notice (CP2000), even if the dollar amounts are correct.

Congress Repealed DeFi Broker Reporting

On April 10, 2025, President Trump signed H.J. Res. 25, repealing the Treasury's rule that would have required DeFi protocols, DEXs, and self-custodial wallets to report transactions as brokers under IRC Section 6045.

This means decentralized exchanges like Uniswap, SushiSwap, and Jupiter will NOT issue 1099-DA forms. If you trade on DeFi protocols, you are solely responsible for tracking and reporting all transactions. The IRS has not waived reporting obligations for taxpayers; it has only removed the requirement for DeFi platforms to act as information reporters.

This creates a significant gap in IRS visibility for DeFi transactions, making accurate self-reporting even more important. The IRS can still identify DeFi activity through on-chain analytics and third-party blockchain intelligence tools like Chainalysis, which the IRS Criminal Investigation division has used since 2015.

What to Do When Your 1099-DA Is Missing Cost Basis

If your 1099-DA shows blank cost basis fields (common for noncovered securities), you need to reconstruct your cost basis from your own records. Here is a step-by-step approach:

Step 1: Gather Transaction History

Download complete transaction history from every exchange and wallet you have used. Most exchanges retain at least three years of data, but some may purge older records. Export CSVs as soon as possible.

Step 2: Identify Original Purchase Records

For each asset sold, trace back to the original purchase. This requires knowing:

The date you acquired the asset
The price you paid (in USD at the time of purchase)
Any fees paid for the acquisition
Which wallet or exchange held the asset

Step 3: Choose a Cost Basis Method

The IRS allows two methods for crypto:

FIFO (First-In, First-Out): The oldest lots are sold first. This is the default if no method is specified.
Specific Identification: You choose which specific lots to sell, documented at the time of disposal.

Per Rev. Rul. 2019-24, once you select a method, you should apply it consistently. Switching methods mid-year can create audit complications.

Step 4: Use Tax Software to Reconcile

This is where crypto tax software becomes essential. Manually reconstructing cost basis across multiple exchanges, wallets, and years of transactions is error-prone and time-consuming.

dTax 1099-DA Reconciliation Feature

dTax includes a dedicated 1099-DA reconciliation engine that automates the process of matching your 1099-DA data against your actual transaction history.

Import and Match: Upload your 1099-DA data alongside your exchange transaction history. dTax automatically matches each reported transaction and flags discrepancies in proceeds, dates, or quantities.

Cost Basis Reconstruction: For noncovered securities with missing cost basis, dTax traces the asset's acquisition history across all connected wallets and exchanges, calculating the correct cost basis using your chosen method (FIFO or Specific ID).

Covered Status Tracking: dTax automatically classifies each transaction as covered or noncovered based on the acquisition date and source, ensuring correct Form 8949 box categorization.

Discrepancy Alerts: If your calculated cost basis differs from the exchange-reported basis, dTax highlights the discrepancy and provides supporting documentation you can reference if the IRS questions your return.

Form 8949 Generation: After reconciliation, dTax generates a complete Form 8949 with all transactions correctly categorized into Boxes A through F, ready for filing or import into TurboTax (via TXF format), H&R Block, or direct attachment to your return.

Common 1099-DA Mistakes to Avoid

Double-counting transfers as sales: When you transfer crypto between your own wallets, exchanges sometimes report this as a disposal. Review your 1099-DA for transfers that are not actual sales.

Ignoring noncovered transactions: Just because cost basis is missing from the 1099-DA does not mean you can skip reporting. The IRS requires you to report all dispositions on Form 8949, whether or not you receive a 1099.

Using exchange-calculated gains without verification: Exchanges may calculate cost basis using FIFO by default, even if you have been using Specific ID. Always verify that the method matches your chosen approach.

Forgetting crypto-to-crypto trades: Every crypto-to-crypto swap (e.g., ETH to USDC) is a taxable event. These should appear on your 1099-DA, but verify that all swaps are captured.

According to the IRS's 2025 Data Book, the agency processed over 2 million CP2000 notices related to information return mismatches. With 1099-DA adding millions of new data points, accurate reconciliation is more important than ever.

Timeline for 1099-DA Implementation

Understanding when different types of transactions fall under 1099-DA reporting:

Tax Year 2025: Centralized exchanges begin issuing 1099-DA for gross proceeds. Cost basis reporting begins for assets acquired on-exchange after this date.
Tax Year 2026: Full cost basis reporting required for covered securities (assets acquired on-exchange after 1/1/2026). Noncovered securities report proceeds only.
DeFi: No broker reporting required (repealed April 2025). Self-reporting by taxpayers remains mandatory.

FAQ

When will I receive a 1099-DA?

Centralized exchanges must send 1099-DA forms by February 15 of the following year, the same deadline as other 1099 forms. For tax year 2025 transactions, you should have received your 1099-DA by February 15, 2026. If you have not received one, contact your exchange directly. Note that exchanges with fewer than $600 in gross proceeds for your account may not issue a form.

What if the cost basis on my 1099-DA is wrong?

If the cost basis reported by your exchange is incorrect (common when you transferred assets in from another exchange), you can report the correct cost basis on Form 8949 using the adjustment column. Enter the 1099-DA reported basis in column (e), your correct basis in column (f), and the adjustment code "B" in column (g). Keep supporting records (transaction receipts, blockchain records) to substantiate your corrected basis if the IRS inquires.

Do I still need to report crypto if I do not receive a 1099-DA?

Yes, absolutely. Under IRC Section 61, all income is taxable regardless of whether you receive an information return. If you traded on DeFi platforms, used self-custody wallets, or your exchange did not issue a 1099-DA, you must still report all gains and losses on Form 8949 and Schedule D. Failure to report is considered tax evasion under IRC Section 7201, which carries penalties of up to $250,000 and five years imprisonment.