IRS Form 1099-DA: Complete Guide for Crypto Traders 

By Clinton Donnelly, CEO, Founder | CryptoTaxAudit

Key Takeaways

• Form 1099-DA is the IRS form used to report digital asset transactions.
• Year one reporting is expected to include gross proceeds, without cost basis.
• Wallet transfers and exchange activity can still show up in reporting records.
• Mismatch issues can lead to IRS notices, including CP2000 letters.

What is Form 1099-DA?

Form 1099-DA is a new IRS tax form for reporting digital asset transactions. 

Starting in January 2026, centralized exchanges will be required to issue this form to report crypto sales and dispositions, dates acquired and sold, cost basis and proceeds, and gain or loss for each transaction. 

It's the IRS's standardized form for reporting crypto activity, similar to how Form 1099-B works for stocks and bonds, but tailored specifically for digital assets.

When does Form 1099-DA reporting begin and what will be included?

The first 1099-DA forms are expected to be issued in January 2026 for the 2025 tax year. 

In the first year, exchanges are expected to report only gross proceeds from sales and transfers, with no cost basis included.

Starting in 2027 and beyond, exchanges are expected to include cost basis when it is available to them.

This means in year one, if you sold $250,000 worth of crypto but your cost basis was $240,000, the IRS may only see the $250,000 proceeds figure without the corresponding basis context. 

Who will receive a Form 1099-DA?

People who sell or transfer digital assets on a U.S.-connected centralized exchange like Coinbase, Kraken, Gemini, Uphold, and Robinhood are expected to receive a 1099-DA.

The form is intended to report taxable events, including sales and certain transfers.

Purchases alone are generally not reported because they are not taxable, but transfers to or from other persons can be taxable. 

How is Form 1099-DA different from 1099-K or 1099-B?

Form 1099-K is a general-purpose form for reporting third-party payments and does not include cost basis or gains, it reports gross receipts.

Form 1099-B is what traditional brokerage accounts typically use to show trades with acquisition date, sale date, cost basis, and gain/loss. 

Form 1099-DA is the digital asset equivalent of 1099-B, tailored for digital assets.

It is expected to be included as part of a composite 1099 package that exchanges send, similar to how traditional brokerages send multiple forms.

Are private wallet transfers reported to the IRS?

Yes, when you transfer crypto from a centralized exchange to a private wallet, that transfer may be reported on the 1099-DA.

The IRS may receive the wallet address you sent to, the date of transfer, and the asset and amount as part of the reporting.

While transfers between your own wallets are not taxable events, they may still appear in reporting records.

The IRS may not initially know whether a wallet is yours, but as funds move across wallets, patterns can emerge that could be used to infer relationships between addresses. 

Does the IRS collect wallet addresses under 1099-DA reporting?

Yes, wallet addresses are expected to be reported.

Centralized exchanges are expected to report outgoing transfers, including the wallet addresses where funds are sent.

The IRS has stated that wallet addresses are not personally identifying information and that the data is transferred securely.

However, over time, this can create a more detailed record of digital asset activity that could be traced across multiple wallets and platforms.

Is offshore crypto activity safe from IRS reporting?

No, offshore wallet activity can increase IRS scrutiny through inbound and outbound exchange reporting.

Every time you move crypto between an offshore wallet and a U.S. exchange, that activity is tracked. 

Exchanges report both deposits and withdrawals, which allows the IRS to link offshore wallets to your identity and begin reconstructing your portfolio across platforms.

Do I need to report my 1099-DA even if I disagree with it?

Yes, even if you disagree with the numbers on your 1099-DA, you must still report it on your tax return. 

If the form is missing from your return, the IRS will notice and may assume you underreported income, which can result in a CP2000 Notice billing you for what they think you owe. 

You should report the form first and fix any discrepancies later with proper documentation.

What happens if my tax return doesn't match my 1099-DA?

The IRS will auto-flag any mismatch between what's reported on your 1099-DA and what appears on your tax return. 

If there's a discrepancy, you can expect a CP2000 letter in your mailbox along with a proposed tax bill. 

Because the first year only reports gross proceeds without cost basis, the IRS might see high-value sales with no basis data and assume your profit was 100%, billing you accordingly unless you have airtight records to prove otherwise.

Why should I care about Form 1099-DA right now?

The data that will show up on your 1099-DA is already being captured by exchanges. 

If your records are sloppy, your cost basis is missing, or your internal transfers aren't tracked properly, the IRS might assume a gain where there wasn't one and trigger a hefty tax bill. 

Once the 1099-DA becomes standard, the IRS will expect your return to match it exactly, and any mismatch will get you flagged. 

Mistakes made now can become audit flags later.

What about mining and staking rewards will they be reported on Form 1099-DA?

Personal mining rewards you generate yourself aren't currently reported on a 1099-DA.

However, if you're using a hosted mining service or staking through a provider, that service might file a 1099-DA on your behalf. 

The same applies to validators, especially those operating under U.S. entities or platforms. 

Reporting obligations for miners, validators, and DeFi users are evolving rapidly.

Are DEX (decentralized exchange) trades included in 1099-DA reporting?

No, not directly. 

DEXs aren't currently required to issue 1099-DAs. 

However, the moment you bridge assets from a DEX back to a centralized exchange, that activity enters the IRS's reporting system. 

That's when the IRS starts connecting the dots and will likely expect an explanation if the numbers don't add up on your tax return.

Why is FIFO-by-wallet now required for crypto?

The IRS now requires FIFO (First In, First Out) to be applied on a wallet-by-wallet basis for crypto transactions starting in 2025. 

This replaces older methods like LIFO, HIFO, and universal pooling that many investors have legally used in the past. 

This is a major shift and is catching many traders off guard. 

The IRS is even attempting to apply this standard retroactively in some audit cases, reaching back to 2017 in documented instances.

What steps should I take now to prepare for Form 1099-DA?

You should: 

(1) Start tracking your cost basis for every transaction if you can't prove what you paid, the IRS may assume it was zero. 

(2) Archive your exchange and wallet histories annually with CSV files, API exports, and screenshots before exchanges potentially go dark. 

(3) Clean up and properly label internal transfers between your own wallets so the IRS doesn't count them as sales. 

(4) Don't rely solely on the 1099-DA to tell your full story, especially if you trade across DEXs, self-custody wallets, or obscure platforms.

How is CryptoTaxAudit different from other crypto tax services?

Most crypto tax platforms just generate a report. 

CryptoTaxAudit delivers audit-ready crypto gain calculations with advanced tools and expert oversight to match trades across wallets, exchanges, and blockchains accurately. 

You get verified results, IRS-ready documentation, and fixed pricing based on trade volume. Unlike software-only services. 

CryptoTaxAudit also defends you in an IRS audit, handling everything from calculating gains to preparing compliant returns to defending against IRS notices and enforcement tactics.

Can CryptoTaxAudit help if I'm behind on my crypto tax reporting?

Yes, CryptoTaxAudit specializes in helping crypto traders who are behind or have messy records.

The team handles forensic crypto accounting, fixes missing cost basis, reconciles exchange histories, and ensures your tax filings line up with what the IRS will see on your 1099-DA.

If the IRS sends you a letter or audit notice, CryptoTaxAudit doesn't just prep returns, they defend them with full representation.

Related Articles: How the 1099-DA Tracks Private Wallets and Offshore Crypto Activity: What the IRS Will See!