Form 1099-DA: The New Tax Flow for Crypto

The IRS has launched a major new data pipeline for crypto taxes. For the 2025 tax year, brokers are required to report gross proceeds from sales and exchanges of digital assets to the IRS and to taxpayers on Form 1099-DA. This creates a direct, mandatory flow of transaction data from platforms like Coinbase and Kraken to the government.

For now, the form comes with a critical gap. Most of these statements will not include the basis for DA transactions in 2025, meaning taxpayers must calculate their own cost basis and resulting gains or losses manually. This shifts a significant compliance burden onto individual filers for this first reporting cycle.

The new system has a tight deadline. Brokers must issue the forms to taxpayers by Feb. 17, 2026. This sets a hard cutoff for when taxpayers need to start reconciling their records against the data they receive, with the full tax filing deadline looming after that.

The Cost Basis Shift and Its Timing

The new tax flow gets a major upgrade next year. Cost basis reporting for digital asset sales is required starting with transactions on or after January 1, 2026. This shift brings crypto tax reporting much closer to the standards that have long applied to traditional securities, improving data consistency for the IRS.

The implementation is phased. For the 2025 tax year, brokers will only report gross proceeds from sales and exchanges on Form 1099-DA. The new cost basis requirement starts with 2026 sales; broker-to-broker transfer reporting is not yet addressed. This creates a two-year transition period where the 2025 form will only include gross proceeds, while 2026 forms will include cost basis.

This change places a heavier recordkeeping burden on taxpayers. Brokers are preparing, but these systems may not be fully available right away. Investors should not rely solely on brokers for accurate cost basis information, especially in the early years. Taxpayers must keep thorough records of acquisition dates, amounts, and sources to accurately calculate gains or losses.

The Flow Impact: Liquidity and Compliance

The new reporting standard forces a costly upgrade on broker systems. Form 1099-DA introduces new identifiers (DTI codes) instead of trading symbols and requires unit precision up to 18 decimals for digital assets. This mandates significant software changes for platforms, creating a near-term compliance cost flow that will hit their bottom lines.

Taxpayers now face a new reconciliation flow. They must match the gross proceeds from sales and exchanges reported on the form against their own transaction records to calculate gains. This increases the volume of data flowing to tax preparers and software tools, adding a layer of operational friction to the filing process.

A critical data gap remains. The form will not report cost basis for non-covered assets like some NFTs or stablecoins, and it excludes assets acquired before 2026. This creates a material audit risk, as taxpayers must rely on imperfect personal records for these categories, potentially leading to disputes with the IRS.