Welcome to the ultimate resource on Form 1099-DA (“Digital Asset Proceeds From Broker Transactions”), your go-to page for all the latest information on this critical IRS form.
The first-ever tax form created specifically for digital assets has dramatically changed the legal landscape for crypto tax reporting.
At Gordon Law, we’ve helped cryptocurrency investors and entrepreneurs navigate confusing regulations since 2014, and we’re here to help you avoid IRS problems in the midst of these dramatic changes.
Whether you’re a digital asset broker, an investor, or simply interested in the evolving tax landscape, this page will provide you with everything you need to know about IRS Form 1099-DA.
What is Form 1099-DA?
Form 1099-DA, officially titled “Digital Asset Proceeds From Broker Transactions,” is the first tax form created by the IRS specifically for reporting digital asset transactions. This form is part of the broader regulatory effort to enhance tax compliance in the rapidly growing digital asset market, including cryptocurrencies, NFTs, and stablecoins.
What’s the latest news on digital asset reporting requirements?
Here’s a brief timeline of developments, starting with the most recent:
- January 2025: Final version of Form 1099-DA and instructions for brokers
- August 2024: Revised draft of Form 1099-DA
- July 2024: Final requirements for custodial brokers
- April 2024: First draft of Form 1099-DA
- August 2023: Proposed regulations for digital asset brokers
- November 2021: Infrastructure Investment and Jobs Act (IIJA) signed into law
This comprehensive guide, prepared by the crypto tax attorneys and blockchain accountants at Gordon Law, reflects the most recent changes as of February 24, 2025.
What’s next?
- Reporting in Effect: 1099-DA reporting is in effect as of January 1, 2025. This means all your 2025 trades performed through digital asset brokers will be reported to the IRS in 2026.
- Increased Audits: Taxpayers should prepare for an unprecedented wave of crypto tax audits and criminal tax investigations.
- Catch Up Now: Taxpayers should use this time before reporting takes place to amend or properly file tax returns to include prior year crypto gains, losses, or income.
- Brokers in Limbo: Cryptocurrency brokers have a grace period to allow their technology and systems to catch up to the full requirements. More changes are likely to arise in the future, so reach out to our cryptocurrency tax lawyers if you have questions about deadlines or compliance.
Why was Form 1099-DA created?
Historically, the crypto landscape has suffered from a lack of standardized tax reporting. Unlike the stock market—where brokers issue a comprehensive Form 1099-B that details every trade—crypto exchanges and wallets have used a patchwork of approaches. Some platforms issued Form 1099-MISC, others generated a Form 1099-B, and quite a few didn’t issue any tax forms at all. This inconsistency forced taxpayers to manually piece together their own records to determine gains and losses, often resulting in misreporting or omissions.
With stocks, the uniformity of reporting means that both taxpayers and the IRS can easily track all transactions. Every trade is documented on a single, consolidated 1099-B, streamlining the process and reducing the likelihood of errors. In the crypto world, however, the absence of such standardization meant that many investors found it challenging to accurately calculate their tax liabilities, and the IRS was left with an incomplete picture of digital asset transactions.
To address these issues, Form 1099-DA was introduced. This new form is designed to standardize reporting by requiring digital asset brokers to provide detailed information about each transaction, including: Purchase Price and Sale Price, Acquisition Date and Sale Date, and other transaction details.
In theory, this standardization should simplify tax reporting for both brokers and taxpayers, making it easier to reconcile gains and losses on tax returns. In practice, however, the transition comes with its own set of challenges. The diverse nature of digital asset transactions and the evolving regulatory framework mean that even with Form 1099-DA, taxpayers might still face complexities that require careful record-keeping and, in many cases, professional guidance.
Who needs to submit Form 1099-DA?
Under the final IRS regulations, anyone that qualifies as a digital asset broker is required to submit Form 1099-DA to the IRS. The updated rules now provide a clear definition: A digital asset broker is any person or organization that actively facilitates digital asset transactions for customers and has access to or verifies the identity of the counterparties involved.
Who is considered a cryptocurrency broker?
Under the final IRS regulations effective July 2025, the definition of a cryptocurrency broker has been refined to focus on the entities that are truly “in a position to know” the identities of the parties involved in digital asset transactions. The final rules now clarify that only those entities that actively facilitate transactions by verifying customer identities and controlling the execution of trades are subject to Form 1099-DA reporting requirements.
Key points of the updated definition include:
- Active Verification and Facilitation: A digital asset broker is now defined as any person or organization that not only facilitates digital asset transactions, but also verifies or maintains access to the identities of the transacting parties.
- In-Scope Entities: Entities that clearly fall within the broker definition include:
- Digital Asset Exchanges: Both custodial and non-custodial platforms that execute trades for customers.
- Hosted Wallet Providers: Providers that hold assets in wallets over which they exercise control and verify user identities.
- Digital Asset Payment Processors: Platforms that process crypto transactions and have the capacity to verify the identities of both buyers and sellers.
- Exempt Entities: Entities that offer unhosted wallet services—where users maintain sole control over their keys and transaction data—are generally not considered brokers unless they function in a manner analogous to an exchange.
- Greater Clarity: Previously, draft versions of Form 1099-DA required brokers to self-identify their “broker type” via check boxes (e.g., kiosk operator, hosted wallet provider, unhosted wallet provider, etc.). The final regulations have removed these check boxes, indicating a move away from self-categorization toward a more objective, behavior-based approach. This change is intended to reduce ambiguity and ensure that only those entities with substantial reporting obligations are subject to the new rules.
Controversy over “broker” definition
Since the Infrastructure Investment and Jobs Act was enacted in November 2021, the definition of a digital asset broker has sparked considerable debate. Early iterations of Form 1099-DA raised concerns that a broad broker definition might inadvertently capture entities that do not function as traditional intermediaries. In particular, the treatment of participants in decentralized finance (DeFi) has been contentious—especially when considering platforms that do not verify customer identities or directly facilitate trade execution.
Recent IRS regulations have provided much-needed clarity for operators of decentralized trading protocols. According to Treasury Decision (TD) 10021 (issued December 27, 2024) and TD 10000 (issued June 28, 2024), the IRS has now specified which services will trigger broker reporting requirements for DeFi operators. Key points include:
- The IRS has adopted a simplified DeFi technology stack model that comprises three layers: interface, application, and settlement. Under this framework, only those entities operating on the interface layer—the point where users interact with the platform—are classified as “trading front-end service providers.” For example, platforms like Uniswap that provide a user interface for token swaps and liquidity provision fall into this category.
- Front-end service providers are presumed to have the ability to access customer information and query transaction details. The regulations clarify that if a provider can update its terms of service, charge fees on the digital assets involved, or add instructions to query the distributed ledger for order execution details, it is considered to be in a “position to know” the full nature of the transaction. This capability triggers the obligation to report under Form 1099-DA.
- Not all DeFi activities will be subject to these reporting requirements. As detailed in IRS Notice 2024-57, transactions such as wrapping and unwrapping, liquidity provider activities, staking, lending, short sales, and notional principal contracts remain excepted from reporting—at least until further notice. These exceptions apply to both traditional brokers and front-end service providers.
The new reporting requirements for front-end service providers will take effect for digital asset sales occurring on or after January 1, 2027. Additionally, backup withholding under these rules is scheduled to begin on January 1, 2028.
Who is exempt from Form 1099-DA reporting?
Notably, the IRS’s proposed regulations do not consider any of the following to be brokers:
- Miners, node operators, or others who are simply maintaining the blockchain
- Software developers who indirectly facilitate digital asset transactions (for example, by developing code for a company like Coinbase)
- Smart contract developers who receive income from a smart contract they created, but do nothing to maintain or update it
Previously, due to the broad language of the Infrastructure Act, there was a great deal of concern that these parties would be considered brokers and would face reporting requirements that they couldn’t possibly fulfill.
What information is reported on Form 1099-DA?
Form 1099-DA will primarily report information that helps taxpayers calculate capital gains from digital assets, as well as ordinary income. This includes:
- When you got the digital asset (Acquisition date)
- How much you paid for it (Cost basis)
- When you sold or swapped it (Sale or disposition date)
- How much money you got from selling or swapping it (Sales proceeds)
What’s not reported?
According to Notice 2024-57, brokers will not have to report the following types of transactions on Form 1099-DA until the IRS issues further guidance:
- Wrapping and unwrapping transactions
- Liquidity provider transactions
- Staking transactions
- Transactions described by digital asset market participants as lending of digital assets
- Transactions described by digital asset market participants as short sales of digital assets
- Notional principal contract transactions
All of these excluded transactions are part of decentralized finance, or DeFi, and they present unique challenges when it comes to tax reporting. Learn more about DeFi taxes here.
Cost basis reporting: Transitional and ongoing challenges
The cost basis of a digital asset is an essential piece of your tax calculations; it’s impossible to calculate capital gains without it. Cost basis will continue to present a reporting challenge as we transition to the Form 1099-DA era.
If you transferred digital assets from another exchange and then sold it, the cost basis information will likely not be available to the exchange you sold from. As a result, the cost basis will be blank on the Form 1099-DA.
What taxpayers need to know:
- Taxpayers are responsible for determining and reporting their own cost basis if they find the box blank on a form they receive.
- Digital asset brokers will not be required to share cost basis information with each other. If you move digital assets between accounts often, you’ll still need to dig up a lot of your own cost basis information.
- The rules for determining cost basis have changed. Crypto investors must transition from universal accounting to wallet-by-wallet accounting. For digital assets acquired before January 1, 2025, taxpayers must rely on their previous tax reports and the safe harbor guidance provided in Revenue Procedure 2024-28.
Safe harbor provided in Revenue Procedure 2024-28
Form 1099-DA reports the cost basis for digital assets acquired on or after January 1, 2025. Revenue Procedure 2024-28 provided a safe harbor to help taxpayers transition to the new reporting requirements.
Under Revenue Procedure 2024-28, taxpayers were able to make a “reasonable allocation” of cost basis into their existing wallets or accounts using one of these methods:
- Specific Unit Allocation: This is an option typically used if you’ve used the Specific ID method for prior years. With Specific Unit Allocation, the assets that were previously specifically identified can stay the same. For any remaining, unspecified assets, the remaining cost basis can be assigned to each asset type within each wallet or account.
- The deadline for making this type of allocation is the earlier of (1) the date and time of the first sale of the asset the taxpayer wishes to specifically allocate cost basis, or (2) the due date of the taxpayer’s federal income tax return.
- Global Unit Allocation: Alternatively, taxpayers can make a Global Unit Allocation. With this method, you prescribe an ordering rule describing the manner in which the cost basis will be ordered and then allocated to each account.
- For example, a global allocation might identify those units of cryptocurrency that have the earliest or latest acquisition dates and, for each of those dates, the highest or lowest amounts of unused cost basis, and allocate such units successively to wallet A, wallet B, and wallet C.
- The deadline for making this type of allocation is the later of (1) the date and time of the first sale of the asset the taxpayer wishes to specifically allocate cost basis, or (2) the due date of the taxpayers Federal income tax return.
The deadline for using this safe harbor was December 31, 2024. If you did not complete your cost basis allocation by the deadline, reach out to our crypto tax attorneys to discuss your options.
Missing cost basis when transferring between brokers
With stocks, when you move assets from one broker to another, the original broker must provide a statement to share the asset’s cost basis and acquisition date with the new broker.
Eventually, a similar system will be in place for cryptocurrency. But until then, taxpayers will find a missing cost basis for any digital asset that was moved to a different wallet or account. If you rely solely on the information from Form 1099-DA, you may end up paying much more tax than you really owe. Our team can help ensure your tax filing is accurate and stress-free.
Other potential problems with Form 1099-DA
Although Form 1099-DA is intended to make crypto tax reporting easier, there are several potential issues for both taxpayers and brokers. The new form is unlikely to solve all your crypto tax reporting headaches, and may create serious problems.
The solution? Continue to create your own crypto tax report using software or an experienced digital asset accountant.
1. Previously unreported crypto
Once brokers start sending Form 1099-DA, the IRS will likely uncover anyone who has not historically reported their digital asset activity properly on their tax returns.
If you believe you fall into this category, contact one of our tax attorneys as soon as possible to address this problem. You may be at risk of a cryptocurrency tax audit or criminal tax investigation.
There are several proactive measures you can consider if you have previously unreported cryptocurrency. These options include:
- Filing Amended Returns: If you have unreported crypto transactions from prior years, filing amended returns can help you correct your tax filings to minimize or avoid penalties and interest.
- Utilizing the Streamlined Disclosure Program: For those with foreign bank accounts or assets related to cryptocurrency, the IRS’s streamlined disclosure program provides a route to come into compliance. This program is designed to ease the process of reporting foreign financial assets while potentially mitigating penalties.
- Participating in the Voluntary Disclosure Program (VDP): If you have concerns that your unreported crypto activity might lead to criminal charges, consider the IRS Voluntary Disclosure Program. It’s critical to act before the IRS initiates an audit or investigation, as doing so will render you ineligible for the VDP.
Taking swift action and consulting with a qualified crypto tax attorney can help you determine which option best fits your situation and ensure that you address any discrepancies before the IRS begins its review.
2. Foreign exchanges
Offshore exchanges that don’t serve US customers will not be required to issue Form 1099-DA.
If you use these exchanges, you won’t get all the information you need to report crypto on your taxes. And if you move crypto around between foreign exchanges and US brokers, it’s fairly simple for the IRS to discover those foreign accounts.
How to prepare for Form 1099-DA
Digital asset brokers
Anyone who may be considered a digital asset broker should seek advice from an experienced crypto tax lawyer as soon as possible. We’ll help you determine whether you’re required to file Form 1099-DA and plan for how to comply. Potential brokers include:
- Custodial and non-custodial cryptocurrency exchanges
- Hosted and unhosted wallet providers
- Bitcoin ATMs
Taxpayers
If you haven’t reported your crypto correctly in the past (either intentionally or by mistake), now’s the time to create an action plan. Intentionally omitting income sources on your tax return could lead to criminal charges, severe financial penalties, and even prison.
The IRS is typically much more lenient with taxpayers who are proactive with fixing mistakes. Call our experienced crypto tax attorneys today to discuss possible solutions, including amended tax returns and the Voluntary Disclosure Program.
Additionally, make sure you report correctly moving forward. You can use crypto tax software to calculate your capital gains, or Gordon Law can do all your reporting for you!
Prepare for the 1099-DA Era
At Gordon Law, we’ve helped thousands of cryptocurrency investors and entrepreneurs avoid trouble with the IRS. Don’t wait until you receive Form 1099-DA! Whether you’re a broker or simply a taxpayer, schedule a confidential consultation with one of our attorneys today. Let’s help you prepare for this new era of IRS crypto reporting.
Sources:
- IRS, “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales”
- IRS, “Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions”
- IRS Revenue Procedure 2024-28
- IRS Notice 2024-57
- IRS Notice 2024-56
