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IRS Expands Digital Asset Reporting with
New Form 1099-DA

If you buy, sell, or trade cryptocurrency or NFTs, there’s a new tax form you need to understand: Form 1099-DA. As the IRS increases enforcement around digital assets, knowing how this form works is crucial to staying compliant and avoiding costly mistakes. If you’ve ever wondered how crypto reporting is changing and what it means for your taxes, this guide breaks it down step by step.

What Is Form 1099-DA?

Form 1099-DA stands for “Digital Asset Proceeds From Broker Transactions.” Starting with the 2025 tax year, major crypto exchanges and brokers are required to report your gross proceeds from digital asset sales directly to the IRS.

Beginning in 2026, the reporting requirements become even stricter, as brokers will also be required to report your adjusted cost basis. This gives the IRS a clearer picture of your actual gains and losses.

How Crypto Is Taxed

Even with the introduction of Form 1099-DA, the way crypto is taxed has not changed. The IRS still treats digital assets as property, not currency.

This means every time you sell, trade, or dispose of crypto, you trigger a taxable event. Your gain or loss is calculated by subtracting your cost basis (what you paid) from your selling price.

If you hold your asset for more than one year, you may qualify for lower long-term capital gains tax rates, which can significantly reduce your tax burden.

Why This Is a Big Deal

The biggest change is not how crypto is taxed—it’s how closely it’s being tracked.

Because the IRS now receives a copy of your Form 1099-DA, their system will automatically compare it to your tax return. If there are discrepancies, missing transactions, or mismatched numbers, it can trigger an IRS notice or even an audit.

This shift eliminates the guesswork and significantly reduces the chances of underreporting going unnoticed.

The DeFi and Foreign Exchange Gap

Not all transactions will show up on Form 1099-DA. Decentralized Finance (DeFi) platforms and certain foreign exchanges are not currently required to issue this form.

However, this does not remove your responsibility. You are still required to track and report all transactions, including:

  • Wallet-to-wallet transfers
  • DeFi trades
  • Activity on foreign exchanges

Even without a form, you are fully responsible for accurate reporting.

Common Mistakes to Avoid

Many crypto investors run into issues by:

  • Relying only on exchange-issued tax forms
  • Ignoring DeFi transactions
  • Miscalculating cost basis
  • Forgetting transfers between wallets
  • Failing to reconcile multiple platforms

These mistakes can lead to incorrect filings and increased IRS scrutiny.

Example Scenario

Let’s say you sold $50,000 worth of crypto on an exchange. That exchange reports the transaction on Form 1099-DA to the IRS.

If you only report $30,000—or fail to report it at all—the IRS system will detect the mismatch and likely send a notice.

On the other hand, if you also had $20,000 in DeFi trades that weren’t reported on a form, you are still required to include those transactions on your tax return.

Why This Matters

Take Mark, a crypto investor who actively traded across multiple exchanges and DeFi platforms. Before Form 1099-DA, he relied on partial records and underreported some transactions.

Now, with IRS matching systems in place, even a small discrepancy could trigger penalties. By working with a CPA to reconcile all his wallets and trades, Mark avoided potential audits and corrected his reporting.

Conclusion

Form 1099-DA marks a major shift in crypto tax enforcement. While the tax rules remain the same, the IRS now has the tools to verify your transactions more accurately than ever before.

Whether you’re trading occasionally or deeply involved in DeFi, proper recordkeeping and reporting are essential. If you’re unsure how to handle your crypto taxes, professional guidance can save you time, money, and stress.

If you need help reconciling your crypto transactions or filing accurately, contact Guerrero CPA at 210-490-7100. Our team is ready to help you stay compliant and keep more of your profits.