For the first time, cryptocurrency investors are receiving a formal IRS information return from their brokers. Form 1099-DA (Digital Asset Proceeds From Broker Transactions) is new for the 2025 tax year. It was created under IRC Section 6045, which was expanded by the Infrastructure Investment and Jobs Act to include digital assets in the definition of "securities" that brokers must report.
If you traded crypto on a custodial exchange like Coinbase or Kraken in 2025, expect to receive a 1099-DA by February 17, 2026. But this form is not a complete picture of your tax liability, and relying on it alone is a mistake.
What Form 1099-DA Reports for 2025
The 2025 version of Form 1099-DA is a partial rollout. Custodial brokers must report:
- Gross proceeds (Box 1f): The total sale amount, before any cost basis reduction
- Asset description and quantity (Box 1a): What was sold and how much
- Sale date (Box 1b): When the transaction was executed
- Federal income tax withheld (Box 4): Backup withholding if a valid TIN was not on file
Brokers are not required to report cost basis for 2025 transactions. Box 2 (cost basis reported to IRS) will generally be unchecked for 2025. This means the IRS receives gross proceeds figures without any offset for what you originally paid. The full cost basis reporting requirement kicks in starting with 2026 transactions for assets acquired and held in the same custodial account ("covered securities" under the final regulations).
What the Form Does Not Cover
The scope of Form 1099-DA is narrower than many investors expect.
Transactions NOT Reported on Form 1099-DA
Out of ScopeNon-custodial and DeFi activity: Decentralized exchanges and self-hosted wallets are not subject to broker reporting. Final regulations that would have extended reporting to DeFi participants were signed into law by Congress in April 2025 under the Congressional Review Act, striking down the DeFi broker rules before they took effect.
Pre-2025 acquisitions: The 1099-DA only covers sales of digital assets in custodial accounts beginning January 1, 2025. There is no retroactive reporting for earlier tax years.
Crypto-to-crypto swaps before 2026: In 2025, brokers are not required to track basis across different digital assets in the same account. Starting 2026, covered securities rules require cost basis to follow the asset through same-account exchanges.
Staking, mining, and airdrops: These are income events, not sale proceeds. They are not reported on Form 1099-DA and require separate income reporting on Schedule 1 or Schedule C.
The Reconciliation Problem
Because cost basis is absent from most 2025 Form 1099-DAs, the gross proceeds figures will not match the capital gain amounts you actually owe tax on. The IRS will eventually receive these proceeds figures through information reporting and may match them against your return.
If your return reflects gains lower than the gross proceeds on your 1099-DA (which is almost always the case once cost basis is applied), be prepared to show your work. Proper documentation means:
- Records of acquisition dates and prices for every asset sold
- Transaction history from all exchanges, including those that went out of business
- Identification of the accounting method used (FIFO, specific identification, HIFO)
- Reconciliation between your 1099-DA and Schedule D
Specific identification is often the most advantageous method for taxpayers with large unrealized gains in older lots. Under Rev. Proc. 2024-28, the IRS provided transition guidance on how to allocate existing crypto holdings to custodial accounts for basis tracking purposes going forward.
2025 vs. 2026: Key Differences in Broker Reporting
Rollout Timeline2025 (current year): Custodial brokers report gross proceeds only. Cost basis reporting is voluntary. DeFi and non-custodial wallets not covered. Taxpayers must provide their own cost basis to calculate correct gain or loss.
2026 (next year): Custodial brokers must report both gross proceeds and adjusted basis for "covered" digital assets (acquired after 2025 in a custodial account and held in that account until sale). Gain/loss calculations will be more automated, but non-custodial activity will still require manual reporting.
How to Use Form 1099-DA When Filing
When you receive a 1099-DA, do not simply import it and stop there. The correct workflow:
- Gather complete transaction history from all exchanges used in 2025, not just those that sent a 1099-DA.
- Calculate cost basis for each sale using your acquisition records and chosen accounting method.
- Report on Schedule D and Form 8949. Short-term gains (held under one year) are taxed as ordinary income. Long-term gains (held over one year) qualify for preferential capital gains rates of 0%, 15%, or 20% depending on taxable income.
- Cross-reference the 1099-DA to confirm the gross proceeds figures match your records. Discrepancies should be resolved before filing, not after receiving an IRS notice.
Crypto held for personal use with an overall loss and transactions under certain de minimis thresholds may qualify for exclusions, though these are narrow and fact-specific.
Crypto tax reporting is more complex this year, not less. If you need help reconciling your 1099-DA against your full trading history, contact TS CPA to get it done right.