Form 1099-DA marks the most significant structural change to third-party crypto reporting to date. Here's what matters:
Brokers are now reporting gross proceeds for 2025 transactions, with cost basis reporting for covered securities beginning with 2026 activity.
Staking, wrapping, and liquidity provider transactions are excluded from broker reporting under current guidance—but they're still taxable. You need your own records.
Cost basis tracking is shifting to wallet-by-wallet accounting. If you've been treating all holdings as one pool, it's time to adapt.
For years, crypto tax compliance has been largely self-reported. Taxpayers gathered their own transaction records, calculated their own gains and losses, and reported those numbers to the IRS with minimal third-party verification.
That's changing.
Form 1099-DA brings digital asset reporting closer to the broker-based framework used for traditional securities. For 2025 transactions, crypto exchanges and other custodial brokers are now required to report digital asset sales directly to both taxpayers and the IRS—and you should be receiving those forms now. Starting with 2026 transactions, they'll also report cost basis for covered securities. For a deeper look at the strategic implications for exchanges, see our guide on broker reporting enforcement.
Form 1099-DA is the IRS's dedicated information return for reporting digital asset transactions. Required under changes to Internal Revenue Code §6045 made by the Infrastructure Investment and Jobs Act (2021), it standardizes broker reporting in a way that mirrors Form 1099-B for securities.
The form reports gross proceeds from sales or exchanges of digital assets—including cryptocurrencies, stablecoins, and NFTs—giving the IRS visibility into transactions that were previously difficult to track at scale.
The IRS defines "broker" broadly. If you hold customer assets and execute their sell orders, you likely have reporting obligations.
Businesses generally required to file include:
Who is currently NOT required to file:
This exclusion for DeFi reflects the current regulatory posture following last year's Congressional Review Act repeal, but the IRS has signaled that reporting expectations for intermediated DeFi activity remain an open issue. Hybrid or front-end custodial arrangements could still face scrutiny as guidance evolves.
For crypto exchanges evaluating their obligations, the key question is whether you "stand ready to effect sales of digital assets" for others in the ordinary course of business.
Not everything appears on Form 1099-DA. Under Notice 2024-57, the IRS has excluded certain transaction types from broker reporting under current guidance:
Additionally, qualifying stablecoin transactions under $10,000 annually and specified NFT transactions under $600 annually fall below current de minimis thresholds under existing guidance (which are narrowly defined and subject to change).
The critical point: Exclusion from 1099-DA reporting does NOT mean exclusion from tax. Staking rewards remain ordinary income under Rev. Rul. 2023-14. If you're participating in DeFi activities, you need independent records—brokers won't be reporting this information.
đź’ˇ Key Insight: Many common DeFi activities won't appear on Form 1099-DA, but they're still fully taxable. The IRS isn't giving you a pass; they're just not getting the data from your broker yet.
This is where things get operationally significant.
What brokers must do: Under the new regulations, brokers are required to track cost basis at the account level using FIFO as the default method, unless you provide specific identification instructions before the sale.
What taxpayers can technically do: You can still use specific identification if you document it properly. But here's the practical reality: if your records don't match what brokers report to the IRS, you'll trigger matching notices.
What this means for you: Many taxpayers previously used a "universal" method—treating all holdings of the same token as interchangeable across wallets. That approach won't survive IRS matching going forward. Revenue Procedure 2024-28 provided one-time transition guidance for allocating basis across wallets, though many taxpayers did not take advantage of this relief before the transition window closed in 2024.
For businesses, transferred-in assets become noncovered securities where brokers cannot report basis. Any discrepancy between your records and the 1099-DA will need documentation to resolve.
💡 Key Insight: The wallet-by-wallet shift isn't a new statute—it's a practical consequence of broker-level reporting. But the effect is the same: if you can't reconcile your records with what the IRS receives, expect questions.
For brokers, penalties can reach $340 per return for failure to file correctly (IRC §6721) and $340 per payee statement for failure to furnish (IRC §6722). For high-volume platforms, these numbers add up quickly.
That said, context matters. The IRS provides reasonable cause relief for good-faith compliance efforts, and correction windows exist for errors caught early. The goal isn't to penalize every mistake—it's to bring crypto reporting into the same framework as traditional securities.
For taxpayers, mismatches between returns and broker-reported data can trigger CP2000 notices and accuracy-related penalties. The best defense is clean records that can reconcile with (or explain discrepancies from) what brokers report.
For exchanges, custodians, and crypto-native businesses, these rules turn tax reporting into an operational function—not just a year-end exercise. The infrastructure you build now determines whether compliance is manageable or chaotic.
At Iota Finance, we help crypto businesses build financial systems designed for this new reality. Our services include cost basis tracking and reconstruction, wallet-level accounting implementation, 1099-DA readiness assessments, and ongoing tax support as regulations evolve.
Not sure where you stand? Use our crypto tax calculator to get a baseline estimate, then schedule a consultation to build systems that hold up to IRS scrutiny.
Disclaimer: This article reflects the regulatory environment as of February 2026 and is for informational purposes only. For guidance tailored to your specific situation, contact Iota Finance.