For TY2025 returns filed in 2026, tax preparers with digital asset clients are navigating the first filing season under Form 1099-DA, the IRS information return introduced by the broker reporting rules under the Infrastructure Investment and Jobs Act. The immediate challenge is not the form itself. It is what the form does not contain: cost basis. For TY2025, covered brokers report gross proceeds from digital asset dispositions. Basis reporting does not begin until TY2026. That gap sits squarely in the practitioner's lap.
This guide is written for tax preparers handling crypto and digital asset clients: enrolled agents, CPAs, and PTIN-holders who need to understand how to receive 1099-DA data, reconcile it against client records when basis is absent or disputed, map transactions to Form 8949 correctly, integrate results on Schedule D, and prepare clients now for the basis reporting that arrives with TY2026. It also covers where 1099-DA does not reach: DeFi protocols, non-custodial transactions, and NFTs that remain outside the current broker reporting framework.
All regulatory references, notice citations, and procedural guidance in this guide should be verified at IRS.gov before relying on them in client engagements. Digital asset tax law is an active area of IRS rulemaking and Congressional activity. This guide is informational and does not constitute legal or tax advice.
What Form 1099-DA Is and Who Issues It
Form 1099-DA is an IRS information return that custodial brokers of digital assets are required to issue to customers who sold, exchanged, or otherwise disposed of digital assets through the broker's platform. The statutory authority is the broker reporting rules enacted in the Infrastructure Investment and Jobs Act of 2021, implemented through Treasury regulations published in 2024. The form is the digital asset counterpart to Form 1099-B, which has long governed securities dispositions at traditional brokerages.
The definition of "broker" under the digital asset regulations is an entity that regularly provides a service effectuating digital asset sales on behalf of customers and knows or should know that the service results in sales. For TY2025 reporting, the rules apply to custodial brokers: platforms that hold digital assets on behalf of customers and execute sales or exchanges at customer direction. Whether any specific platform meets the definition of a covered broker under current regulations is a legal and factual determination. Do not assert to clients that a specific platform is or is not a covered broker. Instead, direct clients to check current IRS guidance and the platform's own 1099-DA issuer status.
The form covers dispositions of digital assets as defined in IRC Section 6045(g)(3)(D): any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology. In practice, this includes cryptocurrencies, stablecoins, and other tokenized assets transacted through covered custodial brokers. The precise scope of what is and is not a covered digital asset under current regulations is an area of active IRS guidance. Verify the current definition at IRS.gov.
Clients will receive Form 1099-DA from covered brokers by January 31 of the year following the tax year. For TY2025 dispositions, clients should receive their 1099-DA by January 31, 2026. The form is furnished to the customer and filed with the IRS, just as 1099-B is for securities. A client who transacted on multiple covered platforms may receive multiple 1099-DA forms.
For a broader orientation to crypto tax preparation, including income recognition for staking, mining, and airdrop events that fall outside 1099-DA reporting, see the cryptocurrency tax preparation guide for tax preparers.
How 1099-DA Differs from 1099-B: The Old Crypto Reporting Form
Before the introduction of Form 1099-DA, some crypto exchanges issued Form 1099-B to clients. That practice was inconsistent across platforms, and the 1099-B format was a rough fit for digital asset reporting because it was designed for exchange-listed securities with established lot identification methods. Form 1099-DA replaces that improvised approach with a digital-asset-specific form. The structural differences matter for how practitioners read and use the data.
Asset type and lot identification
Form 1099-B was designed for securities, where each lot is identified by CUSIP, shares, and purchase date. Form 1099-DA is built for digital assets, where a "lot" may be a fractional token acquired across multiple transactions at different prices. The 1099-DA identifies the asset by token type, the number of units disposed of, and the transaction date. The form accommodates the unique tracking challenges of digital assets, including tokens with no centralized identifier analogous to a CUSIP.
Proceeds-only reporting for TY2025
This is the defining difference for practitioners working on TY2025 returns. Form 1099-B for securities has long reported both gross proceeds and cost basis. Form 1099-DA for TY2025 reports gross proceeds only. Brokers are not required to report basis until TY2026. The practitioner cannot read the 1099-DA and complete an accurate Form 8949 without independently establishing the client's cost basis. Every dollar of basis on a TY2025 digital asset return must come from client records, third-party crypto tax software, or reconstructed transaction histories.
Checkbox structure on Form 8949
Form 1099-B transactions map to Form 8949 checkboxes (A, B, C for short-term; D, E, F for long-term) based on whether the broker reported basis to the IRS and whether the basis is correct. Form 1099-DA creates a different mapping for TY2025 because basis is not reported. Practitioners must determine the correct checkbox for 1099-DA transactions based on the proceeds-only nature of the reporting and any adjustments the practitioner makes. This is covered in detail in Section 5 of this guide.
Scope of covered transactions
Form 1099-B covers sales of securities through regulated brokers and certain barter exchange transactions. Form 1099-DA covers dispositions of digital assets through covered custodial brokers. Decentralized protocols, self-custody wallet transactions, and peer-to-peer transfers that do not go through a covered custodial broker are not covered by 1099-DA under the current regulatory framework. This is a significant scope difference: a client's most complex digital asset activity (DeFi positions, liquidity pools, cross-chain bridges) may generate no 1099-DA at all, even though those transactions remain taxable events.
The TY2025 Proceeds-Only Reality and the Missing Basis Problem
TY2025: PROCEEDS ONLY. BASIS IS NOT ON THE 1099-DA.
For tax year 2025 returns filed in 2026, Form 1099-DA reports gross proceeds from digital asset dispositions only. Brokers do not report cost basis for TY2025. Do not treat the 1099-DA as a complete basis record. Every transaction requires an independently established basis from client records, exchange histories, or reconstructed data. Basis reporting by brokers begins with TY2026.
The proceeds-only nature of TY2025 Form 1099-DA reporting is the central practitioner issue this filing season. On a 1099-B return for a securities account, the broker's reported basis is a starting point: the practitioner checks it against the client's records, adjusts for wash sales or other items, and builds the 8949 from there. The 1099-DA for TY2025 offers no such starting point. Proceeds appear; basis does not.
This creates three distinct reconciliation problems that practitioners will encounter in different combinations depending on the client:
Client has complete records
The best case. The client can supply purchase confirmations, exchange transaction histories, or a crypto tax software export showing acquisition dates, units, and cost basis for every disposed lot. The practitioner reconciles the client's basis records against the 1099-DA proceeds figure, confirms the holding period for each disposition, and maps to Form 8949 with the appropriate adjustment if the client's cost basis differs from any figure the broker reported. Even in this scenario, the practitioner should verify that the 1099-DA proceeds match the client's records. Discrepancies between exchange-reported proceeds and client records are common and must be resolved before the return is filed.
Client has partial records
The common case. The client has some records, but gaps exist. Tokens may have been acquired on exchanges that have since closed, transferred from wallets with incomplete records, or purchased in periods the client did not retain statements for. The practitioner must work with the client to reconstruct basis as completely as possible using available exchange APIs, blockchain explorers, and any historical data the client retained. What cannot be reconstructed cannot simply be set to zero. A zero basis produces a fully taxable gain on the entire proceeds figure, which may overstate the actual gain. The appropriate treatment for genuinely unknown basis involves documentation of the reconstruction effort and, in some cases, a defensible cost basis position based on available data.
Client has no records
The hardest case. A client who cannot produce any basis records for digital assets that appear on a 1099-DA is in a difficult position. The practitioner cannot invent basis, cannot assume a favorable basis without substantiation, and should not file a return with knowingly incorrect figures. The appropriate steps are: attempt to obtain exchange history directly from the platform using the client's account credentials or a formal records request; use blockchain explorer tools to trace on-chain transactions associated with the client's wallet addresses; consult with the client about any purchase records in their email or banking history; and document the reconstruction effort in the file. Whatever basis position is taken must be defensible and documented.
Transitional penalty relief: IRS Notice 2024-56
IRS Notice 2024-56 provides transitional relief related to the digital asset broker reporting requirements during the initial implementation period of Form 1099-DA reporting. The notice addresses penalty relief for brokers and certain transitional compliance matters. Current as of 2026-06-08; verify at IRS.gov for any updates, as the IRS may issue additional guidance, extensions, or modifications to transitional relief provisions. Do not rely on this guide's characterization of Notice 2024-56 as a complete or current statement of transitional relief: verify the full text of the notice and any subsequent IRS guidance at IRS.gov before advising clients or filing positions.
Step-by-Step Reconciliation Workflow: Matching 1099-DA Data to Client Records When Basis Is Missing
A systematic reconciliation workflow reduces the risk of error, creates a defensible paper trail, and prevents the most common mistake in digital asset preparation: treating the 1099-DA as a complete transaction record when it is not. Work through the following steps for each 1099-DA a client receives.
Collect all 1099-DAs and verify completeness
Ask the client for every 1099-DA received, from every platform. Cross-reference against the client's list of exchanges and wallets used during the year. A client who traded on three custodial platforms may have received three 1099-DAs. Missing forms may indicate the platform does not meet the definition of a covered broker for TY2025, or that the client missed a form. Verify the client's complete exchange activity before assuming the 1099-DA set is complete.
Pull complete transaction history from each exchange
Download or request the full transaction history for each account, not just the disposals that appear on the 1099-DA. The complete history is needed to establish basis: every acquisition, transfer in, and disposal. Most exchanges provide CSV or API exports of transaction history. The export must cover the full period of the client's activity on that platform, not just the tax year being filed, because basis depends on acquisition history that may predate TY2025.
Reconcile proceeds: 1099-DA figure vs. transaction history
For each disposal listed on the 1099-DA, locate the corresponding transaction in the exchange history and confirm that the proceeds figure matches. Common discrepancies include proceeds stated in fiat equivalent at a different price point than the actual execution price, fee treatment differences (whether trading fees are netted against proceeds or reported separately), and aggregated reporting of multiple small transactions. Document any discrepancy and determine the correct proceeds figure based on the actual transaction record. If the 1099-DA proceeds are wrong, the return must use the correct figure and the adjustment must be reflected on Form 8949.
Establish cost basis for each disposed lot
Using the acquisition history, apply the client's elected cost basis method (FIFO, specific identification, or other permissible method) to identify which acquisition lots correspond to each disposal. For TY2025, the IRS requires that digital asset taxpayers use a specific identification method if they intend to use a method other than FIFO. A client who has not established specific identification records in advance may be limited to FIFO for TY2025 dispositions. Confirm with the client which method was being tracked during the year. Calculate the basis per unit for each identified lot and the total basis for each disposal.
Determine holding period for each disposal
Holding period drives the Part I (short-term, held one year or less) vs. Part II (long-term, held more than one year) determination on Form 8949. The holding period runs from the acquisition date of the specific lot disposed of to the disposal date. For FIFO lots, the holding period follows the earliest acquisition. For specific identification, it follows the identified lot's acquisition date. Mixed holding periods within a single 1099-DA line item (where the broker aggregates transactions) require disaggregation into short-term and long-term components.
Identify transactions not reported on any 1099-DA
The client's transaction history will likely include taxable dispositions that appear nowhere on any 1099-DA: transfers between wallets, DeFi swaps, NFT sales, and transactions on platforms that are not covered brokers. These transactions are still taxable events under federal law. They must be reported on Form 8949 using client records as the source. The absence of a 1099-DA does not exempt the transaction from reporting; it means the practitioner must rely entirely on client-supplied data.
Document the reconciliation in the file
Before completing Form 8949, the practitioner should have in the file: every 1099-DA received, the exchange transaction history for each platform, the cost basis calculation for each disposed lot, the holding period determination, a list of any transactions not covered by a 1099-DA and the source of the reporting data for those transactions, and any adjustments made to 1099-DA proceeds with the reason for each adjustment. This documentation is the practitioner's defense if the return is later questioned. Digital asset returns are a priority audit area for the IRS; complete documentation protects both the client and the practitioner.
Form 8949 Under the New Reporting Rules: Checkbox Changes and 1099-DA Transaction Mapping
Every digital asset disposition ultimately lands on Form 8949, Sales and Other Dispositions of Capital Assets. Understanding how 1099-DA transactions map to the correct 8949 Part and checkbox is essential for accurate reporting. The checkbox logic for 1099-DA differs from the 1099-B logic that most practitioners are familiar with from securities reporting.
The Part I / Part II split: short-term vs. long-term
Part I of Form 8949 covers short-term capital gains and losses (assets held one year or less). Part II covers long-term (assets held more than one year). The holding period determination from the reconciliation workflow drives this split. A client who disposed of Bitcoin held since 2022 reports those units in Part II. A client who bought and sold Ether within the same calendar year reports those units in Part I. A single 1099-DA may contain both short-term and long-term transactions if the broker aggregates dispositions with different holding periods. The practitioner must disaggregate and allocate to the correct Part.
The checkbox structure for 1099-DA transactions
For TY2025, because Form 1099-DA reports proceeds only (without basis), the checkbox selection is:
- Checkbox B (Part I) or Checkbox E (Part II): Use these checkboxes for transactions where the broker issued a 1099-DA but did not report basis. For TY2025, this will be the applicable checkbox for most 1099-DA-sourced transactions, because brokers report proceeds only. Transactions in this category require the practitioner to supply the basis on Form 8949, and the gain or loss flows through the totals to Schedule D.
- Checkbox C (Part I) or Checkbox F (Part II): Use for transactions not reported on any 1099-DA. This covers DeFi swaps, NFT transactions, peer-to-peer disposals, and any taxable disposition that did not go through a covered broker. For these transactions, the practitioner builds the 8949 line entirely from client records.
Verify the current Form 8949 instructions at IRS.gov before filing. The IRS may update the checkbox guidance specific to Form 1099-DA transactions as the reporting rules are fully implemented. Current instructions are the authoritative source.
Reporting adjustments on Form 8949
When the practitioner's reconciled basis or proceeds figure differs from what appears on the 1099-DA, the difference must be reflected as an adjustment on Form 8949 using the adjustment codes in the form instructions. Common adjustment situations for digital asset transactions include:
- Proceeds on the 1099-DA differ from the actual transaction amount in client records (adjustment to proceeds column)
- Basis supplied by the practitioner differs from any basis figure the broker may have included in supplemental information (adjustment to basis column)
- Incorrect holding period indicated by broker data requires a holding period correction on the form
The adjustment code(s) must be entered in column (f) of Form 8949, and the net adjustment entered in column (g). Use the current Form 8949 instructions to select the correct adjustment code for each situation.
Schedule D Integration: How 1099-DA Results Flow to the Return
Schedule D, Capital Gains and Losses, is the summary form where Form 8949 results aggregate into the total capital gain or loss reported on the return. The relationship between Form 8949 and Schedule D for digital asset transactions works the same way it does for securities, with one important structural note: the totals from each Part and checkbox grouping on Form 8949 carry forward to the matching lines on Schedule D.
The Form 8949 totals feed Schedule D as follows: the sum of all short-term transactions (Part I totals from Form 8949) flows to the short-term section of Schedule D (lines 1a through 3, depending on checkbox). The sum of all long-term transactions (Part II totals from Form 8949) flows to the long-term section of Schedule D (lines 8a through 10). Schedule D then nets short-term gains and losses, nets long-term gains and losses, and combines both into the total capital gain or loss that carries to Form 1040.
Netting and the capital loss limitation
Short-term gains are taxed at ordinary income rates. Long-term gains from digital assets held more than one year qualify for the preferential capital gain rates (0%, 15%, or 20% depending on the taxpayer's taxable income), the same as long-term gains from securities. The $3,000 annual capital loss deduction limit applies to net capital losses from digital assets on the same basis as all other capital losses. Unused capital losses carry forward to future years.
Unlike securities, digital assets are not subject to the wash sale rule under current law: a taxpayer may sell a digital asset at a loss and immediately repurchase the same asset without disallowing the loss. This is a significant planning point for clients with unrealized losses in their digital asset portfolios. Whether and when the wash sale rules will be extended to digital assets is a matter of active Congressional consideration. Verify current law before advising on this point.
The digital asset question on Form 1040
Form 1040 includes a checkbox question asking whether the taxpayer received, sold, exchanged, or otherwise disposed of a digital asset (or a financial interest in a digital asset) during the tax year. This question must be answered Yes if the client had any digital asset transactions, including exchanges between digital assets (such as swapping one cryptocurrency for another), regardless of whether a 1099-DA was issued. A client who only received digital assets without disposing of them may answer No, but any disposal, including using cryptocurrency to purchase goods or services, triggers a Yes answer. Verify the current form instructions for the exact question wording and scope before completing this field.
When Broker Data Is Wrong or Missing: Common 1099-DA Errors
DO NOT FILE WITH KNOWN ERRORS IN 1099-DA DATA
If the client can demonstrate that proceeds figures on a 1099-DA are incorrect, the return must use the correct figures with adjustments on Form 8949, not the uncorrected 1099-DA amounts. Filing with known incorrect data to match the information return exposes the client to an overstated tax liability and is not consistent with the preparer's duty of accuracy.
The first year of 1099-DA reporting will produce data quality problems. Brokers are implementing new systems, the regulatory definitions are complex, and the technical challenges of tracking digital asset transactions accurately are significant. Practitioners should expect to encounter errors and gaps and should know the most common categories.
Wrapped token misreporting
Wrapped tokens, such as Wrapped Ether (WETH) or Wrapped Bitcoin (WBTC), represent an underlying asset in a format compatible with a different blockchain or protocol. Depending on how the exchange tracks and reports these positions, a wrapping or unwrapping event may be treated as a disposal on the 1099-DA when it may not be a taxable event, or it may be omitted when the original asset was disposed of in the wrapping process. The tax treatment of wrapping events is an unsettled area. Practitioners should carefully review any wrapped token transactions in the client's history and document the position taken.
DeFi transactions the 1099-DA does not cover
A client who uses both custodial exchange accounts and DeFi protocols will receive a 1099-DA only for the custodial exchange activity. The DeFi transactions are taxable but not on the 1099-DA. This creates a mismatch: the 1099-DA covers part of the client's activity, but not all of it, and the uncovered portion includes some of the most complex transactions. Practitioners must obtain complete on-chain records for DeFi activity separately and ensure those transactions are reported on Form 8949 using the correct checkbox for transactions not covered by an information return.
Incorrect proceeds calculation
Proceeds should equal the fair market value of the digital asset at the moment of disposal, minus any selling fees. Exchanges may calculate proceeds differently: some net fees before reporting, others report gross proceeds and fees separately, and some use slightly different price reference points for the same transaction. If the client's transaction history shows a materially different proceeds figure than the 1099-DA, investigate the source of the difference before filing. A systemic reporting methodology difference by the exchange is correctable; a data error may require contacting the exchange for a corrected 1099-DA before the filing deadline.
Transactions on the 1099-DA the client did not make
In cases of exchange account compromise, duplicate reporting, or clerical error, a 1099-DA may include dispositions the client did not execute. The client may also receive a 1099-DA from a platform they believe they never used, if an account was opened and funded without the client's knowledge or if the exchange incorrectly attributed transactions. The client must review every line of every 1099-DA for accuracy. Disputed transactions should be investigated with the exchange and documented in the file before filing. If an exchange cannot correct a clearly erroneous 1099-DA before the filing deadline, the practitioner may need to report the correct figures on Form 8949 with an explanation of the discrepancy.
Missing 1099-DA from a covered platform
A client who transacted on a platform that qualifies as a covered broker but did not receive a 1099-DA may have simply not received a form that was issued, or the platform may not have issued one it was required to issue. The absence of a form does not eliminate the reporting obligation. The client must report all taxable dispositions regardless of whether a 1099-DA was received. Verify at IRS.gov and check the platform's own guidance on its 1099-DA issuer status for TY2025.
Tax Software Workflow for 1099-DA Data Entry
For TY2025, the practitioner's software workflow for 1099-DA data must accomplish three things: capture the correct proceeds per transaction as reported on (or corrected from) the 1099-DA, supply the client's independently established cost basis for each disposed lot, and generate a Form 8949 with the correct Part, checkbox, and adjustment entries. Because TY2025 is the first year of 1099-DA reporting, practitioners should verify with their software provider how the software handles 1099-DA input, checkbox selection, and 8949 generation for proceeds-only information returns.
General workflow approach
Regardless of which professional tax software you use, the functional workflow for 1099-DA data is:
Input the 1099-DA data into the return
Enter each 1099-DA in the capital gains section of the return, using the information return input screen your software provides. The input will capture the payer's information, the asset type, units, proceeds, and transaction date. For TY2025, the basis field will not be populated from the 1099-DA itself. Confirm that your software correctly identifies 1099-DA entries as proceeds-only information returns and generates the correct checkbox selection on the resulting 8949 output.
Enter client-supplied basis
For each 1099-DA transaction, enter the cost basis established through your reconciliation workflow. The software should allow you to enter a basis figure that differs from any broker-reported figure and should generate the appropriate adjustment code on Form 8949. If the software does not handle proceeds-only 1099-DA entries correctly for TY2025, you may need to enter the transactions as "basis not reported" entries with the client's basis manually supplied. Contact your software provider for TY2025-specific guidance on 1099-DA workflow.
Enter transactions not covered by a 1099-DA
DeFi transactions, NFT sales, and other uncovered disposals must be entered separately, not attached to any 1099-DA entry. Use the software's manual capital gain entry screen to add these transactions with the checkbox indicating the transaction was not reported on an information return. The software should map these to the correct Form 8949 checkbox (C or F) and carry the totals to Schedule D.
Review the generated Form 8949 and Schedule D output
Before finalizing the return, print or preview Form 8949 and Schedule D and verify: every 1099-DA transaction appears on the correct Part (I or II) with the correct checkbox; basis figures match your reconciliation worksheet; adjustment codes and amounts are correct; uncovered transactions appear with checkbox C or F; and the Schedule D totals match the sum of 8949 inputs. A software-generated 8949 that does not match the practitioner's reconciliation is a filing error waiting to happen. If you are using TaxWise or another professional software package, verify the current-version field names and workflow steps with your software provider, as field labels and entry screens may differ across software versions.
Third-party crypto tax software imports
Many digital asset clients use third-party crypto tax software (such as Koinly, CoinTracker, TaxBit, or similar products) to aggregate transactions across multiple exchanges and wallets and generate a Form 8949 or a transaction CSV for import into professional tax software. These tools can significantly reduce the data entry burden for clients with high transaction volume across multiple platforms. Practitioners who use imported data from third-party crypto tax software should review the import methodology, verify that the software's basis calculations align with the client's elected method, and confirm that the import covers all platforms and wallets rather than just the ones that issued 1099-DAs.
Decentralized Protocols and NFTs: What Form 1099-DA Does Not Cover
The scope of the current Form 1099-DA broker reporting rules is limited to custodial brokers. A substantial portion of digital asset activity occurs outside custodial brokerage relationships, and that activity generates no 1099-DA. Practitioners must understand where the form does not reach, because those transactions are still taxable and the practitioner is still responsible for reporting them accurately.
Decentralized Finance (DeFi) transactions
Decentralized finance protocols (such as decentralized exchanges, lending protocols, liquidity pools, and automated market makers) operate without a central custodian. When a taxpayer swaps Token A for Token B through a DeFi protocol, there is no broker in the traditional sense holding the assets and executing the trade. Under current regulations, these transactions are not subject to the 1099-DA broker reporting rules. There is no 1099-DA issued for DeFi swaps.
This does not change the tax treatment. A DeFi swap is a taxable exchange of property under general federal tax principles: the taxpayer disposes of Token A (triggering a capital gain or loss measured from basis to fair market value at the time of the swap) and acquires Token B at a new basis equal to its fair market value at the time of the swap. The practitioner must obtain the transaction records directly from the client (or from on-chain data using blockchain explorers) and report these transactions on Form 8949. The IRS has consistently taken the position that all cryptocurrency dispositions are taxable events regardless of whether an information return is issued.
Congress repealed the DeFi broker reporting requirements enacted by the Inflation Reduction Act. Those regulations are not in effect. The applicable statutory reference and effective date should be verified at IRS.gov. For TY2025, DeFi transactions are not covered by 1099-DA reporting.
NFT transactions
Non-fungible tokens are not covered under the current Form 1099-DA regulatory framework as a separate reporting category. Sales and exchanges of NFTs through NFT marketplaces do not generate Form 1099-DA under current rules. NFT transactions remain taxable under general principles: a sale of an NFT is a sale of property, and the gain or loss is the difference between proceeds and basis. Depending on the nature of the NFT and the taxpayer's activities, NFT income may be characterized as capital gain, ordinary income, or in some cases may have collectibles treatment implications. See the cryptocurrency tax preparation guide for tax preparers for a broader discussion of NFT tax treatment.
Self-custody wallet-to-wallet transfers
Moving digital assets from one wallet to another that the taxpayer controls is not a taxable event: no disposition occurs. However, wallet-to-wallet transfers from a covered broker's custodial account to a self-custody wallet may be reported on the 1099-DA as a transfer out (depending on the broker's reporting methodology), and transfers into a covered broker account from a self-custody wallet affect the basis tracking the broker will maintain for TY2026 and beyond. Clients who move assets between custodial accounts and self-custody wallets must maintain records of these transfers to support basis tracking across the full ownership history.
Staking, mining, and other income events
Receipt of digital assets as staking rewards, mining income, airdrop proceeds, or other income events is not a Form 1099-DA reporting event. These are ordinary income inclusion events, reported as income at the fair market value of the tokens at the time of receipt. A subsequent sale of those tokens is a capital gain event, reported on Form 8949 with a basis equal to the fair market value at the time of receipt (the amount previously included in income). The 1099-DA covers the disposal side of that transaction; the income inclusion at receipt is a separate matter that requires separate documentation. For a full treatment of crypto income types and their reporting, see the cryptocurrency tax preparation guide for tax preparers.
TY2026 Preview: Basis Reporting Arrives -- How to Prepare Clients Now
Beginning with tax year 2026 (returns filed in 2027), covered brokers are required to report cost basis on Form 1099-DA in addition to gross proceeds. That change transforms the information return from a proceeds-only document into something closer to the full 1099-B that securities preparers are used to working with. For practitioners, the TY2026 transition means both new efficiency (basis available from the form) and new complexity (reconciling the broker's basis against the client's records, including basis from pre-2026 acquisitions that the broker may not have complete information for).
Why the TY2026 transition creates a new reconciliation problem
For securities, brokers have decades of institutional practice tracking basis, including the Section 1012 rules for cost basis reporting that apply to "covered" securities acquired after January 1, 2011. Digital assets have no such history. When brokers begin reporting basis for TY2026, the basis figures will only reflect acquisitions through the current broker: digital assets the client bought on a different exchange and transferred in, or acquired through mining, staking, or DeFi activity before moving to a custodial account, may have a zero basis or an incorrect basis in the broker's system.
This is not a minor issue. Clients who have held digital assets across multiple platforms over several years and consolidated them into a single custodial account for TY2026 disposals may receive a 1099-DA showing a broker-computed basis that dramatically understates their actual cost. A practitioner who accepts the broker's basis without verification in TY2026 may report a significantly overstated gain. The reconciliation burden does not disappear when basis reporting begins; it shifts from "establish basis from scratch" to "verify and correct the broker's basis."
What to do with clients now, before TY2026
Reconstruct and document all historical basis now
The work of establishing basis for TY2025 reconciliation is the same work that will be needed to correct broker-reported basis in TY2026 and beyond. Do not discard the basis records assembled for TY2025. They are the foundation of every future year's reconciliation. Clients should retain complete transaction histories, including acquisition records from platforms they no longer use, and maintain a running basis record for all digital asset positions they continue to hold.
Notify custodial brokers of accurate transfer basis
When a client transfers digital assets from an outside wallet or exchange into a custodial account that will report 1099-DA for TY2026, the broker needs the correct basis for those transferred assets to report accurately. Clients should investigate whether their custodial broker accepts basis documentation for incoming transfers and, if so, provide the acquisition cost information in the broker's required format. Brokers vary in their ability to accept and apply transferred basis; the client should verify this directly with the platform well before year-end 2026.
Establish and document the cost basis method election
For TY2026, clients who want to use a specific identification method for digital asset lot selection must establish and document that election. A client who has not made a specific identification election may be limited to FIFO, which can produce significantly different gain or loss outcomes depending on the acquisition history. Discuss the basis method options with clients during or after TY2025 tax preparation, while the issue is fresh, and document the elected method in the client's file.
Review the IRS's updated guidance on broker basis reporting
The IRS and Treasury continue to issue guidance on the implementation of digital asset broker reporting. Practitioners should monitor IRS.gov and the Federal Register for updates to the TY2026 basis reporting requirements, any modifications to the definitions of covered brokers or covered transactions, and any additional transitional relief that may affect the TY2026 filing season. Verify current guidance at IRS.gov; do not rely on this guide as a current statement of TY2026 requirements.
Practitioner Pre-Filing Checklist: Form 1099-DA and Digital Asset Returns
Use this checklist before finalizing any return with digital asset activity. Each item represents a step that, if skipped, is a documented source of error in digital asset returns.
Client intake and documentation
- All 1099-DA forms received from every custodial platform have been collected and reviewed.
- The client has provided a complete list of all exchanges, wallets, and platforms used during the tax year.
- Complete transaction histories have been obtained for each platform (not just the 1099-DA summary).
- All digital asset activity has been accounted for, including DeFi transactions, NFT sales, staking income, and wallet-to-wallet transfers.
- Acquisition records for all disposed lots have been obtained or reconstructed.
- The cost basis method (FIFO, specific identification) has been confirmed with the client and documented in the file.
1099-DA reconciliation
- Each 1099-DA proceeds figure has been verified against the exchange's transaction history.
- Discrepancies between 1099-DA proceeds and exchange records have been investigated and documented.
- Any corrected proceeds figures are supported by exchange records in the file.
- The platform issuing each 1099-DA has been confirmed as a covered broker; the client's activity on non-covered platforms has been separately documented.
Form 8949 and Schedule D
- Each disposed lot has been assigned to Part I (short-term) or Part II (long-term) based on holding period from the identified acquisition date.
- 1099-DA-covered transactions are entered with the correct checkbox (B for short-term; E for long-term) reflecting proceeds-only reporting.
- Non-1099-DA transactions (DeFi, NFTs, uncovered platforms) are entered with checkbox C (short-term) or F (long-term).
- Adjustment codes and amounts are correct for any transaction where the client's figures differ from the 1099-DA.
- Schedule D totals match the sum of all Form 8949 inputs.
- The Form 1040 digital asset question is answered correctly based on the client's activity.
File documentation
- All 1099-DA forms are retained in the file.
- Exchange transaction history exports are retained for each platform.
- Basis calculation worksheets are in the file for each disposed lot.
- Any reconciliation adjustments are explained in a preparer workpaper.
- Non-1099-DA transactions are documented with source records (on-chain data, client records, or third-party software export).
- The elected cost basis method is documented.
- Penalty exposure related to information return accuracy and preparer due diligence has been reviewed in light of any applicable IRS guidance on transitional relief. See the IRS penalty abatement guide for tax preparers and the backup withholding guide for tax preparers for context on information return penalties and backup withholding obligations that may intersect with 1099-DA reporting.
TY2026 preparation (complete during TY2025 preparation)
- Basis records for all currently held digital asset positions have been documented and provided to the client for retention.
- The client understands that brokers will report basis beginning TY2026 and that the broker's basis may not reflect the client's actual cost for assets transferred from other platforms.
- The client has been advised to investigate whether their custodial broker accepts transfer basis documentation and to provide it before year-end 2026 for any incoming asset transfers.
- The client's cost basis method election has been discussed and documented for future years.
March 2026 IRS Proposed Regulations: Alternative Electronic Furnishing Consent
In March 2026, the IRS issued proposed regulations providing an alternative electronic furnishing consent procedure for custodial brokers issuing Form 1099-DA to customers. For practitioners advising custodial broker clients, these proposed rules introduce an option that may affect how clients receive their 1099-DA forms going forward.
Under the proposed rule, a custodial broker may furnish Form 1099-DA electronically to a customer who affirmatively opts into electronic delivery through the broker's own platform settings. This alternative procedure, if finalized, would allow brokers to satisfy the electronic furnishing requirement without obtaining a separate paper consent form meeting the pre-existing regulatory requirements for electronic statement delivery. The customer's affirmative opt-in through the platform is the operative consent under the proposed framework.
This is a proposed rule. As of the date of this guide, it has not been finalized. Practitioners advising custodial broker clients on 1099-DA delivery procedures, recordkeeping systems, or compliance workflows should monitor IRS.gov for finalization. Do not advise clients to rely on this alternative procedure until the rule is final and its effective date is confirmed; the IRS may finalize the rule as proposed, modify it, or withdraw it. Verify finalization status and specific requirements at IRS.gov (cite as: IRS proposed regulations issued March 2026).
The practical impact for taxpayer clients depends on the choices they have made at their custodial broker. Taxpayers who have affirmatively opted into electronic delivery through their broker's platform settings may receive their Form 1099-DA electronically under the alternative procedure if the broker's system implements it. Taxpayers who have not opted into electronic delivery at their custodial broker may still receive paper Form 1099-DA forms regardless of whether the proposed rule is finalized, unless they subsequently take action through their broker's platform. During client intake, practitioners should ask whether the client has configured electronic delivery preferences at each custodial exchange where they hold accounts, as this affects where the client expects to find their 1099-DA at filing time.
Regulatory and Compliance Notice
The following items in this guide are subject to IRS rulemaking, Congressional action, and Treasury guidance that may change after publication. Verify each at IRS.gov before relying on them in client engagements. (1) Broker coverage: which platforms constitute covered brokers under the digital asset reporting regulations is a legal and factual determination that may be contested. Do not assert specific platform status; direct clients to IRS.gov and the platform's own guidance. (2) IRS Notice 2024-56 transitional relief: cited in this guide as providing relief related to the initial implementation period of 1099-DA reporting. Current as of 2026-06-08; verify at IRS.gov for any updates, extensions, or modifications. (3) TY2025 proceeds-only status: the characterization that basis reporting by brokers begins with TY2026 reflects the current regulatory implementation schedule. Verify at IRS.gov that no acceleration or modification has occurred. (4) Form 8949 checkbox guidance for 1099-DA transactions: verify the current Form 8949 instructions at IRS.gov for the most current guidance on checkbox selection for 1099-DA-sourced transactions. (5) DeFi regulatory status: DeFi transactions are not covered by current 1099-DA broker reporting rules. Congress repealed the DeFi broker reporting requirements; verify the applicable statutory reference and effective date at IRS.gov. NFT transactions remain outside the current 1099-DA regulatory framework; verify at IRS.gov. (6) Tax software field names: if using TaxWise or any other professional software for 1099-DA data entry, verify current-version field names and workflow steps directly with your software provider, as field labels and entry screens may differ across software versions. This guide is informational and does not constitute legal or tax advice.
Frequently Asked Questions
What is Form 1099-DA?
Form 1099-DA is an IRS information return that custodial brokers of digital assets are required to issue to customers who sold, exchanged, or otherwise disposed of digital assets through a covered broker. It was introduced by the Infrastructure Investment and Jobs Act of 2021 and the associated Treasury regulations. For tax year 2025 (returns filed in 2026), brokers report gross proceeds from digital asset dispositions only. Cost basis reporting by brokers does not begin until tax year 2026. The form is the digital-asset equivalent of Form 1099-B for securities, but the two forms differ in structure, checkbox logic, and the scope of what is covered.
Does Form 1099-DA include cost basis for TY2025?
No. For tax year 2025 (returns filed in 2026), Form 1099-DA reports gross proceeds only. Brokers are not required to report cost basis until tax year 2026. This is the central reconciliation burden for practitioners preparing TY2025 digital asset returns: proceeds appear on the 1099-DA, but the client must supply basis from their own records, third-party crypto tax software, or reconstructed transaction histories. Preparers cannot assume basis is accurate or complete from broker data alone for TY2025.
How does Form 1099-DA affect Form 8949?
Each disposition reported on Form 1099-DA maps to a line on Form 8949. The applicable Part (I for short-term, II for long-term) and checkbox (A, B, or C for Part I; D, E, or F for Part II) depend on whether the broker reported basis and whether the taxpayer's basis matches the broker's reported figure. For TY2025, because brokers report proceeds only and basis is not on the 1099-DA, most digital asset transactions will be reported using checkbox B (Part I) or checkbox E (Part II), reflecting broker reporting without basis. Transactions not covered by any 1099-DA use checkbox C (Part I) or F (Part II). The proceeds from the 1099-DA flow to Schedule D through Form 8949. Practitioners must verify holding period for each transaction to assign it to the correct Part. Confirm the current checkbox guidance in the Form 8949 instructions at IRS.gov.
What digital asset transactions does Form 1099-DA not cover?
Form 1099-DA under current regulations applies to transactions through custodial brokers only. Decentralized finance (DeFi) transactions conducted directly through non-custodial protocols, self-custody wallet-to-wallet transfers, and peer-to-peer transactions are not subject to the current broker reporting rules. NFT transactions are not covered under the current regulatory framework for 1099-DA. These transactions remain taxable events under general federal tax law, but the preparer must obtain records directly from the client rather than relying on a 1099-DA. Congress repealed the DeFi broker reporting requirements; verify the applicable statutory reference and effective date at IRS.gov.
What is IRS Notice 2024-56 and how does it affect TY2025 returns?
IRS Notice 2024-56 provides transitional relief related to digital asset broker reporting requirements under the Infrastructure Investment and Jobs Act. It addresses penalty relief for brokers and certain transitional compliance matters during the initial implementation period of Form 1099-DA reporting. Current as of 2026-06-08; verify at IRS.gov for any updates, as the IRS may issue additional guidance, extensions, or modifications to transitional relief provisions.
How should tax preparers handle missing or incorrect 1099-DA data?
When 1099-DA data is missing, covers a platform the client did not use, or contains proceeds figures the client disputes, the practitioner should: obtain the client's complete transaction history directly from the exchange or wallet, reconcile the discrepancy between the 1099-DA and the client records, and document the basis for any adjustment made on Form 8949. Common error sources include wrapped token representations, incorrect lot identification, transactions on protocols not covered by broker reporting, and exchange errors in proceeds calculation. Do not file using uncorrected 1099-DA data if the client can demonstrate the figure is wrong. Document the reconciliation in the file.