The IRS has officially introduced Form 1099-DA, a new information return designed to track digital asset sales and exchanges. Starting with the 2025 tax year (filed in early 2026), most custodial exchanges and digital asset brokers will be required to send these forms both to the IRS and to their customers.
This marks a major shift in how the IRS monitors crypto activity, and it will change what many investors receive at tax time. In this blog post, we will explain everything you need to know about Form 1099-DA and how to get ready to handle it for the upcoming 2025 tax season.
What Form 1099-DA Actually Reports
Form 1099-DA (Digital Assets) reports the gross proceeds from the sale or exchange of digital assets, similar to how Form 1099-B works for traditional securities.
For 2025 transactions, brokers must report:
– Gross proceeds from each sale or exchange
– The digital asset identifier (e.g., token name or contract address)
– The transaction date and time
– Your name, address, and taxpayer ID number
Important: For the 2025 filing year, cost basis and acquisition date are not required. Those fields become mandatory starting in 2026. In other words: the 1099-DA will show what you received from selling your crypto, but not what you paid for it.
What’s Not Covered by Form 1099-DA
Form 1099-DA applies only to dispositions, that is, when a broker facilitates a sale or exchange. It does not report income earned through holding or participating in digital asset ecosystems.
You won’t see the following items on your 1099-DA:
– Staking rewards
– Interest or yield from lending or DeFi protocols
– Airdrops, hard forks, or token grants
– Mining rewards
– Promotional bonuses or referral incentives
While these transactions aren’t part of Form 1099-DA, they’re still taxable as ordinary income. Platforms that pay this type of income may issue Form 1099-MISC or Form 1099-INT, depending on the nature of the payment.
Other 1099 Forms for Crypto Income
| Crypto activity | Typical reporting form | Reporting threshold | Tax treatment |
| Selling/swapping crypto | 1099-DA | None | Capital gains/losses |
| Staking rewards, airdrops, bonuses | 1099-MISC | ≥ $600 | Ordinary income |
| Interest/yield on crypto | 1099-INT or 1099-MISC | ≥ $10 or $600 | Ordinary income |
| Mining (business) | None (self-report) | N/A | Business income (Schedule C) |
| Mining (hobby) | None (self-report) | N/A | Other income (Schedule 1) |
Even if you don’t receive a 1099 form, you’re still required to report all taxable crypto income and gains on your tax return.
Why Reconciling Crypto Transactions Matters
The IRS’s digital asset reporting rules are designed to close the compliance gap between what taxpayers report and what the IRS can verify. If your crypto activity isn’t fully reconciled, meaning each sale, transfer, and conversion can be traced back to its original acquisition, the IRS may see unmatched data and assume unreported income.
From a Tax Liability Perspective:
– Without accurate cost basis tracking, you may overstate your capital gains and pay more tax than necessary.
– Conversely, failing to report a sale or applying an incorrect basis could trigger underreporting penalties.
– Proper reconciliation ensures that losses, fees, and token conversions are correctly captured — often saving thousands in unnecessary taxes.
From an IRS Audit Perspective:
– Starting in 2026, the IRS will receive 1099-DAs directly from brokers, allowing them to cross-check your tax return.
– Mismatches (e.g., missing transactions, inconsistent proceeds) are automatically flagged, often resulting in CP2000 notices or crypto audit examinations.
– Having a complete, reconciled record with cost basis documentation for every sale is your best defense against an IRS inquiry.
New for 2025: Wallet-by-Wallet Cost Basis Method
Effective January 1, 2025, taxpayers are required to use the “wallet-by-wallet” cost basis allocation method, replacing the so-called “universal” method many investors previously used.
Under the wallet-by-wallet method, each wallet, account, or address is treated as a separate pool for cost-basis and gain/loss calculations. You can no longer aggregate all holdings of the same token across multiple wallets. This aligns with how brokers will eventually report cost basis on Form 1099-DA.
Transition Requirements under Rev. Proc. 2024-28:
Taxpayers who previously used a universal method must formally transition to the wallet-by-wallet method under Revenue Procedure 2024-28. You must:
– Adopt the new method as of January 1, 2025
– Apply the transition from universal method to wallet-by-wallet method procedures to maintain compliance
Failing to make this transition properly could result in basis inconsistencies and increase your audit exposure once brokers begin cost-basis reporting in 2026.
Wallet-by-Wallet Transition Checklist:
1. Identify all wallets and exchange accounts you’ve used through 2024.
2. Assign each wallet its own cost-basis record.
3. Verify historical transaction data and reconcile transfers between wallets.
4. Perform the transition procedure specified in Rev. Proc. 2024-28 and adopt the wallet-by-wallet method on Jan. 1, 2025.
5. Work with a qualified crypto tax CPA to confirm your transition documentation is audit-ready.
How to Prepare for the 2025 Filing Season
Following are some steps you can take to get ready for the upcoming 2025 tax season. Seek professional help if you are not sure how to carry out any of the steps.
1. Import all your crypto transaction history to a crypto tax software.
2. Reconcile cost basis and transfers.
3. Classify all your transactions correctly.
4. Implement wallet-by-wallet tracking.
5. Generate a crypto tax report, make sure it’s correct, and perform matching with Form 1099-DA and other crypto related 1099’s you received.
Don’t Rely Solely on Software or Untrained Preparers
Crypto tax software can be helpful, but it’s not a substitute for professional reconciliation or review. Many investors assume that importing wallet data into software automatically produces an accurate tax report, but that’s rarely true.
Exchange data often contain duplicates, mislabeled transfers, or missing cost-basis links. Software tools can’t interpret these nuances, and the resulting reports may misstate gains or omit income.
Likewise, working with a preparer who doesn’t understand crypto reconciliation can be risky. If your preparer simply asks for a crypto tax report from software without verifying it, they’re relying on potentially flawed data. This can lead to inaccurate returns or IRS notices. If you get an IRS audit, you cannot push the blame to your tax preparer, because every taxpayer is ultimately responsible for everything reported on their tax return.
The Bottom Line
Form 1099-DA is the start of a broader IRS initiative to bring crypto reporting in line with traditional assets. With wallet-by-wallet cost-basis rules under Rev. Proc. 2024-28, and new matching capabilities, accurate recordkeeping is critical. Engaging a crypto tax CPA to handle your crypto account reconciliation and prepare your tax return can help you ensure tax compliance, avoid overpaying taxes and minimize your audit risks.
