What Is Form 1099-DA?
If you opened your email this week and saw “Form 1099-DA Available” from your crypto exchange, welcome to a new era of crypto tax reporting. This form is the IRS’s way of bringing cryptocurrency into the same reporting framework as stocks and bonds. If you’re wondering what it means, why the numbers might not make sense, or what you’re supposed to do with it, those are exactly the right questions.
Short Answer
Form 1099-DA reports cryptocurrency transactions to the IRS. Exchanges send this form to both you and the IRS when you sell or exchange digital assets. For 2025 transactions, the form shows proceeds only, with zero or incomplete cost basis. This is by design, not an error. You must provide your actual cost basis on Form 8949 to calculate correct tax liability. The IRS receives automated reports of your proceeds and will match them against your tax return, making accurate reporting essential.
What This Means in Practice
The IRS now receives transaction data directly from centralized exchanges through automated reporting. If your tax return doesn’t account for transactions shown on your 1099-DA, the IRS computer systems will detect this automatically and send a CP2000 notice proposing additional tax based on the full proceeds with zero cost basis.
Here’s what that looks like in real terms:
- You receive a 1099-DA showing $100,000 in proceeds from selling Bitcoin.
- If you don’t file a return reporting that $100,000, the IRS computer assumes you have $100,000 of gain and calculates tax on that amount.
- In reality, you might have bought that Bitcoin for $80,000, making your actual gain $20,000.
- The burden is on you to report both the proceeds and your cost basis on Form 8949.
The critical thing to understand is that for 2025 transactions, exchanges are only required to report sale prices, not including your cost. This isn’t a mistake or incomplete reporting. It’s how the regulations are written for the first year. Cost basis reporting for certain transactions doesn’t begin until 2026 and is still limited.
📊 Understanding What You Must Report
For 2025 transactions (forms you’re receiving now):
| Asset Type | Cost Basis Reported? | Who Tracks Basis? |
|---|---|---|
| Non-Covered Assets (essentially everything for 2025) | ❌ No | You |
| Crypto bought before Jan 1, 2026 | Zero or blank on form | You provide records |
| Crypto transferred into exchange | Zero or blank on form | You provide records |
| Anything moved between platforms | Zero or blank on form | You provide records |
If you self-report your costs to the exchange, they may report it in 2025, but it is not legally required and should be verified carefully.
Starting 2026 (next year’s transactions):
| Asset Type | Cost Basis Reported? | Who Tracks Basis? |
|---|---|---|
| Covered Assets | ✅ Yes | Exchange |
| Crypto bought ON that exchange after Jan 1, 2026 | Reported to IRS | Exchange tracks it |
| Non-Covered Assets | ❌ No | You |
| Everything else | Still your responsibility | You provide records |
Key takeaway: Zero cost basis on your 2025 form is normal. It doesn’t mean you can’t claim basis. It means you need to provide it.
You need to track and report cost basis yourself for anything you transferred between platforms. The exchange has no record of what you paid when you bought those assets elsewhere.
When This Applies
Exchanges must issue Form 1099-DA for sales and exchanges of digital assets during the tax year. There’s no minimum dollar threshold. One taxable transaction triggers the requirement.
You’ll receive a 1099-DA from:
- Centralized exchanges (Coinbase, Kraken, Gemini, Binance.US)
- Crypto brokers and custodians
- Digital asset payment processors
- Hosted wallet providers
✅ What’s On the Form vs. ❌ What’s Not
1099-DA WILL show:
- ✅ Crypto-to-fiat sales
- ✅ Crypto-to-crypto exchanges
- ✅ NFT sales over $600
- ✅ Stablecoin transactions over $10,000
- ✅ Proceeds (what you received)
1099-DA will NOT show:
- ❌ Your cost basis (for 2025 transactions)
- ❌ DeFi transactions (swaps, liquidity pools, yield farming)
- ❌ Wallet-to-wallet transfers
- ❌ Wrapping/unwrapping tokens
- ❌ Lending transactions
- ❌ NFT sales under $600
- ❌ Stablecoin swaps under $10,000
- ❌ Staking rewards (those go on Form 1099-MISC)
Important: Just because something isn’t on the 1099-DA doesn’t mean you don’t have to report it. The form is incomplete by design.
You may receive multiple 1099-DAs from a single exchange, potentially one per asset type or transaction category.
When This Does Not Apply
Form 1099-DA only reports broker-facilitated transactions. If your crypto activity occurred through decentralized exchanges, self-custody wallets, or peer-to-peer transactions, you won’t receive this form. That doesn’t eliminate your reporting obligation. You’re responsible for tracking and reporting that activity yourself.
This means the 1099-DA is incomplete by design. You cannot rely on it alone to prepare your tax return. It shows some transactions but not all taxable activity.
What Not to Do
Don’t Panic When You See Zero Basis
The most common reaction I’m already seeing is panic when clients receive a 1099-DA showing large proceeds with zero cost basis. “Does this mean I owe tax on the entire amount?” No. It means the exchange doesn’t have your cost basis information and isn’t required to report it for 2025 transactions.
This happens with what the regulations call “non-covered assets.” For 2025, essentially all your crypto is non-covered. Covered assets only begin when you buy crypto on an exchange after January 1, 2026. Anything you bought before then, or anything you transferred into the exchange from elsewhere, is non-covered. The exchange has no legal obligation to track or report your basis for non-covered assets.
You still get to claim your actual cost basis. You just have to provide it yourself on Form 8949 with supporting records.
Don’t Assume the Form Shows Everything
The 1099-DA is not like a W-2 where you can just copy the numbers onto your return and be done. By regulatory design, it’s incomplete. It won’t show your DeFi transactions, wallet-to-wallet trades, small NFT sales, wrapping transactions, or stablecoin swaps under $10,000. All of those create tax reporting obligations that you’re responsible for tracking independently.
If you only report what’s on your 1099-DA, you’re underreporting. If the IRS later discovers unreported transactions through blockchain analysis or other information, you face penalties for incomplete reporting.
Don’t Expect Your Software to Match Exactly
Your tracking software and the exchange use different data sources, price feeds, and transaction categorization. Small discrepancies in reported proceeds are normal and expected. A $99,800 proceeds calculation from your software versus $100,000 on the 1099-DA happens because of timestamp differences, price source variations, or how fees were handled.
For small differences, most practitioners take the conservative approach and report what matches the 1099-DA to avoid triggering automated matching notices. For larger discrepancies, you need to investigate which number is actually correct and document why you’re reporting a different amount than what the exchange reported to the IRS.
Don’t Trust Transfer Categories Without Checking
Exchanges may incorrectly report transfers between your own wallets as taxable disposals because they can’t see that both wallets belong to you. If you moved Bitcoin from your Ledger to Coinbase and the exchange categorizes that as a sale, your 1099-DA will show a taxable transaction that didn’t actually occur.
You’re responsible for correctly categorizing these as non-taxable transfers on your return, with documentation showing both wallets are under your control.
Don’t File Before All Forms Arrive
Exchanges have until February 17, 2026 to furnish 1099-DAs for 2025 transactions. Some send them early. Some send them mid-February. Some send corrected versions after the initial forms go out. If you used multiple platforms, wait until you have everything before filing. Filing with incomplete information means either amending later or facing IRS notices about unreported transactions.
How I Handle This
Collecting Everything First
I start by collecting every 1099-DA from every platform the client used. Then I get complete transaction exports from those platforms and any self-custody wallets. This builds a picture that includes what the 1099-DAs captured and what they didn’t.
Reconstructing Cost Basis
For assets without reported cost basis, I work backward from available records. Old exchange statements. Wallet transaction logs. Purchase confirmations. Whatever exists gets documented. When records are incomplete, I document what’s missing and use reasonable methods to establish basis where possible.
Investigating Discrepancies
When the 1099-DA proceeds don’t match tracking software, I figure out why. Small variance from price feeds or timestamps? I usually report what matches the IRS data to avoid automated notices. Significant discrepancy? I determine which is correct and document the reasoning.
Using Form 8949 Adjustment Columns
Form 8949 has adjustment columns specifically for reconciling reported amounts. I use those to show the IRS why numbers differ from the 1099-DA when they need to. The goal is a return that reflects actual tax liability with a clear paper trail.
Being Direct About Complexity
When someone has significant DeFi activity, multiple wallets, or complex history, I tell them what this requires. The IRS has automated matching now. Getting this right matters more than it used to.
What To Do Next
Your immediate action steps:
Wait for all forms - Don’t file until mid-February at earliest. Forms arrive by Feb 17, and corrected versions often follow.
Gather your records - Find purchase confirmations, old exchange statements, wallet histories for anything you transferred between platforms.
Compare everything - Match your 1099-DAs against complete transaction history. Look for what’s missing (DeFi, small NFTs, stablecoin swaps, transfers).
Reconstruct cost basis - For non-covered assets (which is most of your 2025 crypto), document what you paid when you bought them.
Investigate discrepancies - If your tracking software shows different proceeds than the 1099-DA, understand why before deciding which to report.
Report comprehensively on Form 8949 - Include everything: what’s on the 1099-DA, what’s not on it, your actual cost basis, and reconciliation adjustments.
For situations involving multiple exchanges, significant transfer activity, DeFi transactions, or missing historical records, this is where specialized help matters. The IRS matching system is automated and unforgiving. Your return needs to account for everything, not just what appeared on forms.
At some point, actions were taken in wallets under your control. Now those actions have reporting requirements. We just need to make sure everything reconciles correctly so the IRS computers stay quiet.
Litten Tax specializes in cryptocurrency tax preparation, including DeFi, staking, NFTs, and Form 1099-DA reconciliation.
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