Understanding Form 1099-DA: The New IRS Crypto Reporting Tool
Form 1099-DA explained in one line: it is the new IRS information return that U.S. crypto brokers use to report your digital asset sales – gross proceeds always, and cost basis only for “covered” coins bought in that same account on or after January 1, 2026. Coins you bought earlier, or transferred in from another exchange or your own wallet, will often show proceeds with a blank basis box. A blank basis is not a zero basis, and if you file as if it were, you can pay tax on money you never made.
Imagine a startup founder sitting at their kitchen table in February, opening a fresh PDF from their exchange. The proceeds column is full, but the cost basis column is empty on half the lines. They bought most of that bitcoin in 2021, moved it to a hardware wallet, then sent it back to sell this year. The form is technically correct, but incomplete — exactly the kind of gap that can cost people money.
This is the trap to watch out for before your 2026 forms arrive. Remember: the form is not your tax return. It is the IRS’s copy of what your broker saw — and your broker did not see everything.
Gordon Law Group, a specialized crypto tax law firm, breaks down what the form reports and highlights where the cost basis gap appears.
What Form 1099-DA Actually Is
Form 1099-DA, officially known as Digital Asset Proceeds From Broker Transactions, is a new information return introduced by the IRS. It stems from expanded broker reporting rules enacted under the 2021 Infrastructure Investment and Jobs Act and finalized by the Treasury Department in 2024. Think of it as the crypto equivalent of the familiar Form 1099-B that stock brokerages send you.
According to the IRS’s Understanding your Form 1099-DA page, brokers use this form to report proceeds from digital asset transactions — including selling coins for dollars, trading one coin for another, paying for goods or services with crypto, and even paying broker fees in crypto — both to you and the IRS.
Two critical points the IRS stresses, which many overlook:
- You must report all digital asset income, gains, and losses whether or not you receive a Form 1099-DA.
- You are responsible for calculating your cost basis before filing; the form does not do this calculation for you.
Currently, the filing requirement primarily applies to U.S. custodial brokers — centralized exchanges and apps holding coins on your behalf. In April 2025, Congress nullified a planned rule that would have required decentralized finance (DeFi) platforms to issue 1099-DA forms via the Congressional Review Act. This does not exempt DeFi activity from taxation; it simply means no form will be issued for those transactions.
The Timeline: What Already Happened and What Arrives in Early 2027
Many articles get fuzzy about the timeline, so here’s the clear version from IRS instructions:
| Sales made in | What brokers must report | When you see the form |
|---|---|---|
| 2025 | Gross proceeds only. Basis reporting was not required, though some brokers showed it voluntarily. | Early 2026 (the first wave already went out) |
| 2026 and later | Gross proceeds on all digital asset sales, plus mandatory basis for covered coins. Basis for noncovered coins is optional. | Early 2027 for the 2026 tax year, typically around mid-February |
If you sold crypto through a U.S. exchange in 2025, you likely already received a Form 1099-DA showing proceeds only. The 2026 forms arriving in early 2027 will be the first to include mandatory cost basis reporting for covered coins and introduce the distinction between covered and noncovered assets.
Covered vs Noncovered: Why Your Basis Box Might Be Blank
Per the 2026 Instructions for Form 1099-DA, a “covered security” is a digital asset acquired after 2025 in a broker account where custody is provided, and which remained in that account until sale. Everything else is considered noncovered. The IRS specifically lists noncovered digital assets as including:
- Coins acquired before 2026
- Coins transferred into the broker from another exchange or wallet
- Coins not held in custody by the broker at acquisition
Brokers must report cost basis for covered coins but may leave the basis field blank for noncovered coins or report it voluntarily while flagging the lot as noncovered. When coins are transferred in, brokers also report the number of units and transfer date in boxes 12a and 12b.
In practical terms, if you bought bitcoin on Exchange A in March 2026 and sold it there in October 2026, expect a basis number on your form. But if you bought it in 2022, or moved bitcoin from Exchange A to Exchange B before selling, expect a blank basis or a voluntary number you should verify against your personal records.
The Basis Mistake That Costs You: Blank Does Not Mean Zero
Your taxable gain is calculated as proceeds minus adjusted cost basis. If the form shows you sold $40,000 of bitcoin but leaves the basis box empty, the IRS still sees the full $40,000 proceeds. Without reporting your true cost basis, the IRS may treat the entire amount as gain.
Consider this example: you bought those coins for $28,000 in 2021, including fees. Your actual gain is $12,000. Reporting it with a blank basis could look like a $40,000 gain on paper. This discrepancy isn’t a minor rounding error; it’s real money going unnecessarily to the Treasury, or it triggers IRS mismatch notices that can consume your time and resources.
The fix is straightforward but requires diligence and record-keeping:
- Gather every exchange history you have, including from closed accounts. Download CSV exports before platforms change their tools.
- Match each sale on the 1099-DA to the actual lot sold, including purchase date and cost with fees.
- Use the transfer-in date in box 12b to trace coins back to their original source wallet or exchange.
- Report the corrected cost basis on Form 8949, using the appropriate digital asset checkboxes that indicate whether basis was reported to the IRS.
- Keep all documentation, as the IRS expects supporting records for every position on your return. Lack of documentation can turn a real cost basis into a zero on paper.
Your bitcoin investment strategy can be savvy, but your tax filing can still trip you up. In fact, founders with average returns but impeccable records often fare better than those with great returns but messy paperwork.
How Self-Custody Transfers Are Handled
Transferring coins between wallets or accounts you own is not a taxable event, according to the IRS’s digital asset FAQs. The only exception is when crypto is spent or withheld for network fees — that portion is treated as a disposal.
The bigger challenge is the paperwork. Once coins leave an exchange for your own wallet, the broker loses visibility. When you later send those coins back to a broker to sell, the broker treats them as transferred-in and noncovered. Expect proceeds with a blank basis, requiring you to fill in the gap from your own records.
Two recent IRS rules make these records more crucial:
- Wallet-by-wallet tracking: Starting January 1, 2025, the IRS expects cost basis to be tracked by wallet or account, not pooled universally. Rev. Proc. 2024-28 provides a one-time safe harbor to allocate older unused basis to wallets as of that date — a valuable option to explore with your CPA.
- Default first-in, first-out (FIFO): If you sell part of your holdings without specifying which lots are sold, the IRS defaults to FIFO — selling the earliest acquired units first. For custodial accounts after 2025, brokers facilitate specific identification through their lot identifiers.
None of this should discourage self-custody. It simply underscores the importance of maintaining a simple ledger with dates, wallet addresses, units, cost, fees, and transaction history.
What I Would Do Before Your 2026 Forms Arrive
If you run a solo business or manage your own crypto portfolio, integrate these steps into your year-end tax preparation before December 31, rather than scrambling in April:
- List every exchange, app, and wallet you used in 2026, including any you no longer use.
- Export full transaction histories now and save them securely outside the platforms.
- Identify every coin moved in or out of exchanges this year — those will likely have blank basis lines.
- Check how each broker handles lot selection and whether you have set specific instructions.
- Schedule time with a CPA experienced in digital assets, bringing your records — not just the forms — for review.
Remember, the Form 1099-DA is the IRS’s snapshot of your year, but your records are your strongest defense. When discrepancies arise, the taxpayer with thorough documentation usually prevails.
This article is educational and not personal tax advice. Crypto tax rules are evolving, and your individual situation matters. Use this knowledge to ask informed questions and consult a qualified CPA or tax attorney to finalize your return.
Form 1099-DA FAQs
What is Form 1099-DA?
Form 1099-DA, Digital Asset Proceeds From Broker Transactions, is the IRS information return U.S. crypto brokers use to report your digital asset sales. It always shows gross proceeds and, for covered coins, cost basis. You still calculate and report gain or loss yourself.
When will I get my 2026 Form 1099-DA?
Forms covering 2026 sales arrive in early 2027, typically around mid-February. Brokers already sent proceeds-only forms for 2025 sales in early 2026. The 2026 forms are the first to require cost basis for covered coins bought in that account.
Why is the cost basis blank on my Form 1099-DA?
Basis is required only for covered coins acquired in that broker account on or after January 1, 2026, and held there until sale. Older coins and coins transferred in from another exchange or your own wallet are noncovered, so brokers may leave basis blank.
Does a blank cost basis mean my basis is zero?
No. Blank means the broker did not report it, not that you paid nothing. Use your own purchase records to report the real basis on Form 8949. Filing with basis missing can overstate your gain and trigger IRS mismatch notices.
Is moving crypto to my own wallet taxable?
No. Transfers between wallets or accounts you own are not taxable, except crypto spent or withheld for network fees. But coins you later send back to an exchange are treated as noncovered, so keep records of the original cost and dates.
The post Form 1099-DA Explained: The New Crypto Tax Form and the Basis Mistake That Costs You appeared first on Addicted 2 Success.
