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Crypto Law/Level II · Tax: the first trap/2.3 Records and reporting/Lesson 5

Form 1099-DA and broker reporting

Since 2025, US crypto brokers report customers’ sales to the IRS on a new form, and the gaps in what they report can create mismatches on your return.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. A Form 1099-DA showing proceeds without basis is not a tax bill: report the sale on Form 8949 box H or K with basis from your own records, so only proceeds minus documented cost is gain.
  2. If a CP2000 notice proposes tax on a blank basis, answer it yourself, free, with your records by the date on the notice; it is a proposal, not a bill.
  3. Coins bought after 2025 and held at the same broker until sale are covered, so the broker reports basis to the IRS; keeping lots where they were bought cuts reconciliation work.
  4. Below reporting thresholds (designated stablecoin proceeds up to $10,000 under the optional method; specified NFTs $600) no form may arrive, but gains remain taxable and go in Form 8949 boxes I or L.
  5. Decentralized platforms and self-custody software issue no 1099-DA after Pub. L. 119-5 voided the DeFi broker rule; that is privacy from third-party reporting, not from tax, so those trades still go on Form 8949.

MaterialsThe IRS Instructions for Form 1099-DA (2026 edition), especially ‘Covered security’ and ‘Noncovered security’Any Form 1099-DA you received for 2025, set beside your own records of the same salesForm 8949, which since tax year 2025 has separate boxes G to L for digital asset transactions

Wonder

  1. What exactly does my exchange now tell the IRS about me?
  2. Why might my 1099-DA show proceeds but no cost?
  3. Do decentralized exchanges and self-custody wallets send these forms?

Explore

  1. Form 1099-DA, Digital Asset Proceeds From Broker Transactions, is an information return. A broker files it with the IRS and sends a copy to the customer, much as a stock broker sends Form 1099-B. It exists because the Infrastructure Investment and Jobs Act of 2021, in section 80603, extended the broker reporting rules of 26 U.S.C. §6045 to digital assets. Treasury and the IRS issued final regulations, T.D. 10000, on 9 July 2024. The IRS describes the brokers covered as including custodial trading platforms, certain hosted wallet providers, digital asset kiosks and certain processors of digital asset payments.
  2. The rules phase in. For sales on or after 1 January 2025, brokers report gross proceeds, so the first forms reached customers in early 2026. For sales after 2025, brokers must also report basis, but only for covered securities. A covered security, in the 1099-DA instructions, is a digital asset acquired after 2025 in an account where the broker provided custody and held there until the broker sold it. Assets bought before 2026, or transferred in from another wallet or platform, are noncovered: the broker need not report their basis, and a form that shows proceeds without basis is common.
  3. That gap is a trap. The IRS matches information returns against tax returns, and when income reported by third parties does not match, it can send a notice proposing changes, often a CP2000, which is a proposal rather than a bill. A sale that appears on a 1099-DA but not on the return, or appears without its basis, is the kind of mismatch that can lead to such a notice. Form 8949 for 2025 added boxes for this: G and J for 1099-DA sales with basis reported to the IRS, H and K without basis reported, and I and L for digital asset sales with no 1099-DA at all.
  4. Some sales are exempt or simplified. A broker using the optional method for qualifying stablecoins need not report a customer’s designated stablecoin sales if their total proceeds for the year do not exceed $10,000. Under the optional method for specified NFTs, the threshold is $600, and the same $600 figure applies to certain payment processor sales. Below these thresholds the form may not arrive, but the gain or loss is still taxable. Brokers must also collect taxpayer identification numbers, and IRS Notices 2024-56 and 2025-33 suspended backup withholding on digital asset sales during 2025 and 2026, with further transition rules for 2027.
  5. Decentralized platforms are outside this regime. In December 2024 the IRS published a rule treating certain providers of front-end services for decentralized trading as brokers. Congress overturned it under the Congressional Review Act: H.J. Res. 25 passed the House on 11 March 2025 and the Senate on 26 March, and was signed on 10 April 2025 as Pub. L. 119-5, stating that the rule ‘shall have no force or effect’. The 1099-DA instructions also exclude anyone who only provides software or hardware that lets users control their own private keys. As a result, swaps made on decentralized platforms generally produce no 1099-DA, yet the tax rules for them are unchanged (lesson 2.1.3).
  6. A practical check: for each 1099-DA, match every reported sale to your own record by date, asset and quantity, and confirm the basis from your lot list (lesson 2.3.1). Note any sale where the form shows no basis and any sale you made that has no form. Errors on the form are possible; brokers can issue corrected forms, and a return may differ from a 1099-DA when the taxpayer’s records support the difference. This lesson explains the reporting system; it does not recommend any platform. Other countries run their own regimes, such as the EU’s DAC8 (lesson 8.2.2) and the OECD’s CARF (lesson 7.2.7).

Key facts

  • Section 80603 of the Infrastructure Investment and Jobs Act (2021) extended broker reporting under 26 U.S.C. §6045 to digital assets.
  • The final broker regulations, T.D. 10000, were published on 9 July 2024 and require Form 1099-DA reporting of gross proceeds for sales on or after 1 January 2025.
  • For sales after 2025, brokers must report basis only for covered securities, generally digital assets acquired after 2025 and held in the broker’s custody until sale.
  • A broker using the optional stablecoin method need not report designated stablecoin sales when a customer’s annual proceeds do not exceed $10,000.
  • Pub. L. 119-5, signed on 10 April 2025, used the Congressional Review Act to void the IRS rule on reporting by decentralized-exchange front ends.
  • IRS Notice 2025-33 extended relief so that brokers need not backup withhold on digital asset sales effected in 2025 or 2026.

Exercise nine, six, three, one

9CollectList up to 9 crypto sales or swaps you made or have studied in one year, noting the platform, whether you received a Form 1099-DA for it, and whether the form showed basis.
6ClusterSort them into 6 categories: reported with basis, reported without basis, stablecoin sales, NFT sales, swaps on decentralized platforms, and sales with no form for another reason.
3DistillReduce the 6 categories to 3 groups: sales the IRS sees in full, sales the IRS sees only as proceeds, and sales the IRS does not see on any information return.
1CrystallizeWrite 1 sentence explaining, in your own words, why a Form 1099-DA showing proceeds but no basis needs your own records to report correctly.

Fact check

Dates, figures and claims checked against the published sources listed below.

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