What Happened
If you sold, traded, or exchanged any cryptocurrency on a U.S. exchange during 2025, you are about to receive a new tax form you've never seen before: Form 1099-DA, Digital Asset Proceeds from Broker Transactions. Your exchange is sending a copy to you and an identical copy to the IRS. This is the first year this has ever happened.
The form was created under the Infrastructure Investment and Jobs Act, 2 signed in late 2021. The IRS finalized the reporting regulations in 2024 1 and phased them in: for 2025 transactions, exchanges must report gross proceeds. For 2026 transactions, they must also report cost basis for covered digital assets. The era of crypto as a self-reported, honor-system asset class is over.
A poll of 1,000 American crypto holders by Awaken Tax 3 found that over half are afraid they'll face IRS penalties this year. The fear isn't unfounded — under 20% of crypto holders currently report their transactions accurately. The IRS now has the data to close that gap.
Why It Matters
The 1099-DA doesn't just create a tax filing obligation. It creates a surveillance architecture. Every trade on a regulated exchange now generates a government record tying your identity to specific transaction amounts, dates, and digital assets. That data sits in IRS systems indefinitely. It can be cross-referenced with chain analysis. It can be subpoenaed. It persists whether you file accurately or not.
The practical impact goes beyond tax compliance. If you've ever sent Bitcoin from cold storage to Coinbase to sell, Coinbase doesn't know your original acquisition price. They'll report proceeds but not your actual cost basis — meaning the IRS receives an incomplete picture that may look like 100% profit. Coinbase has publicly acknowledged this problem. The onus falls entirely on you to file Form 8949 with your actual basis.
Starting January 1, 2025, the IRS eliminated the universal wallet method 4 — which let you treat similar digital assets across all accounts as a single pool for cost basis calculations. You must now calculate basis on a wallet-by-wallet, account-by-account basis. If you moved Bitcoin between wallets before selling, your basis tracking just became substantially more complex.
For long-term holders who have accumulated Bitcoin across multiple exchanges and self-custody wallets over years, this change creates a serious record-keeping burden. The IRS published Revenue Procedure 2024-28 to allow taxpayers to allocate unused basis to specific wallets as of January 1, 2025, but most holders don't know this exists.
The IRS hasn't been subtle about this. Standardized reporting makes audits more efficient. When the IRS can automatically compare what Coinbase reports against what you file, discrepancies are flagged by software, not by humans. The cost of enforcement drops. The probability of detection rises. The IRS has been actively targeting crypto tax evasion for years — the 1099-DA gives them the data to scale that effort.
Businesses that receive more than $10,000 in cryptocurrency must also file Form 8300, the same form required for cash transactions over that threshold. The Treasury has paused enforcement until final regulations are issued, but the reporting obligation exists in law.
What This Means for You
Start with your records. If you've been trading on exchanges, download your complete transaction history now — before the 1099-DA arrives. Cross-reference it with your own records. Identify any gaps between what the exchange knows and what actually happened (transfers from cold storage, gifts, peer-to-peer purchases). You need to patch what the 1099-DA gets wrong.
Use dedicated crypto tax software. Tools like Koinly, CoinTracker, and Awaken Tax can import exchange histories and help calculate basis across wallets. This is no longer optional for anyone with more than a handful of trades. The cost of the software is trivial compared to the cost of an IRS notice.
Understand what exchanges don't report. Staking rewards, certain DeFi transactions, and non-custodial activity are currently exempt from 1099-DA reporting under IRS Notice 2024-57. But they're still taxable. The absence of a form doesn't equal the absence of an obligation. Keep your own records of everything.
What to Watch
The IRS has extended transitional relief — reducing penalties for brokers who make good-faith efforts to file correctly in 2026. Expect late or corrected 1099-DAs to arrive through the spring. Don't file your return the day your first 1099-DA arrives. Wait for all forms and reconcile against your records.
Also watch for the 2027 backup withholding requirement. If you haven't submitted Form W-9 to your exchange by then, your exchange may be required to withhold a portion of your proceeds and send it directly to the IRS. Get your tax information current with every exchange you use — now, not later.