Form 1099-DA Guide 2025: What Crypto Investors Must Know

Q: Do non-US exchanges send Form 1099-DA?

Foreign exchanges generally are not required to file Form 1099-DA since they don't operate in the US. However, US taxpayers must still report all worldwide income. You must self-report these transactions on Form 8949, and may need to file FBAR if your foreign account exceeded $10,000.

🎯 Key Takeaways (Featured Snippet Optimization)

Starting January 1, 2025, crypto exchanges must send Form 1099-DA to report your digital asset transactions:

Mandatory Reporting - Exchanges, brokers, and payment processors must file Form 1099-DA with the IRS
Covers All Transactions - Sales, exchanges, disposals, and certain DeFi activities are reported
You'll Receive Two Copies - One for your records, one automatically sent to the IRS
Mismatches = Audits - If your tax return doesn't match the 1099-DA, expect IRS questions
Year-End 2024 Is First Filing - Forms covering 2024 transactions will be sent by January 31, 2025

Bottom Line: Form 1099-DA fundamentally changes crypto tax compliance. Exchanges now report your activity directly to the IRS, making it impossible to "forget" about crypto transactions. Learn how to read your form and reconcile it with your records to avoid audits.

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What Is Form 1099-DA?

Form 1099-DA (Digital Asset Proceeds from Broker Transactions) is a new IRS tax form that crypto exchanges and brokers must send to investors starting in 2025. The form reports your cryptocurrency sales, exchanges, and other disposals to both you and the Internal Revenue Service.

Think of it as the crypto equivalent of Form 1099-B, which stockbrokers have used for decades to report stock sales. Just as your brokerage sends you a 1099-B showing your stock trades, crypto exchanges will now send Form 1099-DA showing your Bitcoin, Ethereum, and altcoin transactions.

Here's why this matters: For years, crypto investors operated in a reporting gray area. The IRS knew taxpayers owed taxes on crypto gains, but exchanges weren't required to report transaction details. That changes in 2025.

Key Information Reported on Form 1099-DA

Your Form 1099-DA will include:

Date of acquisition - When you originally bought the crypto
Date of sale or exchange - When you disposed of it
Proceeds from sale - How much you received
Cost basis - What you originally paid (if exchange has this data)
Gain or loss - Calculated profit or loss (if basis is known)
Short-term vs long-term - Holding period classification

Important: Not all exchanges have complete cost basis information, especially if you transferred crypto in from another platform. We'll explain how to handle incomplete 1099-DA forms in the troubleshooting section below.

Why Form 1099-DA Was Created

The IRS introduced Form 1099-DA to close a massive tax compliance gap. According to IRS estimates, less than 5% of cryptocurrency transactions were being properly reported to the IRS before 2025.

The Problem the IRS Was Solving

Before Form 1099-DA existed, here's what was happening:

Scenario 1: The "Forgetful" Trader
Sarah bought 1 BTC on Coinbase for $30,000 in 2022. In 2024, she sold it for $60,000—a $30,000 capital gain. Because Coinbase wasn't required to report the sale to the IRS, Sarah simply didn't report it on her tax return. The IRS had no way to know the transaction occurred.

Scenario 2: The Cross-Platform Puzzle
Mike bought ETH on Kraken, transferred it to MetaMask, swapped it for USDC on Uniswap, then sold the USDC on Binance. Each platform only saw a piece of the transaction chain. Nobody reported anything to the IRS. Mike claimed he "lost money in crypto" despite netting $50,000 in gains.

Scenario 3: The DeFi Ghost
Jessica made $200,000 yield farming on Curve and Aave. Because DeFi protocols don't collect KYC information, there were zero tax forms sent to the IRS. She didn't file anything, figuring "DeFi is anonymous."

The IRS's Solution: Mandatory Broker Reporting

The Infrastructure Investment and Jobs Act (passed in November 2021) gave the IRS authority to treat cryptocurrency exchanges and brokers the same as stock brokerages. Starting January 1, 2025, they must:

Track cost basis - Know when you bought crypto and what you paid
Report disposals - Send Form 1099-DA for every sale, trade, or exchange
File with IRS - Submit forms by January 31 following the tax year
Send you a copy - You must receive your copy by January 31

Impact: The "tax gap" for crypto—the difference between taxes owed and taxes paid—is estimated at $50 billion over 10 years. Form 1099-DA aims to recover $28 billion of that through better compliance.

[Internal Link: Learn more about how cryptocurrency is taxed in our comprehensive guide.]

Who Must File Form 1099-DA?

Not every crypto transaction triggers a Form 1099-DA. The IRS created specific rules about which platforms must file and which transactions must be reported.

Entities Required to File

Must file Form 1099-DA:

Centralized Crypto Exchanges
- Coinbase, Binance.US, Kraken, Gemini, etc.
- Any platform that matches buyers and sellers
Brokerage Platforms
- Robinhood, Webull, eToro, PayPal
- Traditional brokers offering crypto trading
Crypto ATM Operators
- Machines facilitating crypto purchases/sales
- Must report if transaction exceeds $10,000 aggregate
Payment Processors
- Companies processing crypto payments for merchants
- Examples: BitPay, Coinbase Commerce
Custodial Wallet Services
- Exchanges that hold crypto on your behalf
- Only if they facilitate sales/exchanges

NOT required to file (as of 2025):

❌ Decentralized Exchanges (DEXs) - Uniswap, SushiSwap, dYdX
❌ Non-custodial Wallets - MetaMask, Ledger, Trezor
❌ DeFi Protocols - Aave, Compound, Curve (no KYC)
❌ P2P Transactions - Direct wallet-to-wallet transfers
❌ NFT Marketplaces - OpenSea, Blur (separate rules apply)

Gray Area: Hybrid Platforms
Some platforms like Coinbase Wallet (non-custodial) and Coinbase Exchange (custodial) operate under the same brand. Only the custodial exchange must file Form 1099-DA. Your non-custodial wallet activity remains unreported—for now.

Transactions That Trigger Reporting

Your exchange will send Form 1099-DA if you:

✅ Sell crypto for fiat currency (USD, EUR, etc.)
✅ Trade one crypto for another (BTC → ETH)
✅ Spend crypto to purchase goods/services
✅ Withdraw crypto to external wallet (this doesn't trigger taxes, but may be reported)

Transactions that DO NOT trigger 1099-DA:

❌ Simply holding crypto (no sale = no reporting)
❌ Transferring crypto between your own wallets on same exchange
❌ Receiving crypto as a gift (separate Form 1099-MISC rules)
❌ Mining rewards (reported on Form 1099-NEC or 1099-MISC)

How to Read Form 1099-DA

When you receive Form 1099-DA (by mail or electronically), it will look similar to Form 1099-B but with crypto-specific fields. Let's walk through each section so you understand exactly what you're looking at.

Form 1099-DA Section Breakdown

Box 1: Description of Digital Asset

Example: "Bitcoin (BTC)"

This identifies which cryptocurrency was sold or exchanged. If you traded multiple cryptos, you'll receive separate 1099-DA forms for each disposal.

Box 2: Date Acquired

Example: "03/15/2023"

The date you originally purchased or received the crypto. This determines if your gain/loss is short-term (held ≤ 1 year) or long-term (held > 1 year).

Important: If you transferred crypto from another exchange, your current exchange may not have the acquisition date. The box will show "VARIOUS" or be left blank.

Box 3: Date Sold or Disposed

Example: "11/20/2024"

The date you sold, traded, or disposed of the crypto. This is the date your taxable event occurred.

Box 4: Proceeds

Example: "$5,247.83"

The amount you received from the sale. If you traded BTC for ETH, this is the fair market value of the ETH you received at the time of the trade.

Box 5: Cost Basis

Example: "$3,100.00" or "Basis Not Reported to IRS"

What you originally paid for the crypto, including fees. This determines your capital gain or loss.

Critical: Many exchanges can't determine cost basis accurately, especially for:

Crypto transferred in from other platforms
Crypto received as gifts or airdrops
Complex DeFi transactions

If basis isn't reported, you'll see a checkbox marked "Basis not reported to IRS." You're responsible for calculating it yourself.

Box 6: Gain or Loss

Example: "$2,147.83" (calculated as Box 4 minus Box 5)

Your capital gain (if positive) or capital loss (if negative). Only appears if exchange successfully calculated basis.

Box 7: Type of Gain or Loss

Example: "Short-term" or "Long-term"

Based on holding period. Short-term = held ≤ 1 year (taxed as ordinary income rates). Long-term = held > 1 year (preferential capital gains rates).

Box 8: Wash Sale Loss Disallowed

Example: "$0" or "$450.00"

Currently, wash sale rules don't apply to cryptocurrency (they only apply to securities). This box will typically be $0 or blank. However, proposed legislation may change this in future years.

Example Form 1099-DA

Here's a real-world example of what you might receive:

FORM 1099-DA     TAX YEAR: 2024

PAYER: Coinbase, Inc.
100 Pine St, San Francisco, CA 94111
EIN: 46-4707224

RECIPIENT: John Doe
123 Main St, Anytown, CA 94XXX
SSN: XXX-XX-1234

┌─────────────────────────────────────────────┐
│ Box 1: Bitcoin (BTC)                        │
│ Box 2: 04/10/2023                           │
│ Box 3: 09/15/2024                           │
│ Box 4: $67,450.00                           │
│ Box 5: $45,000.00                           │
│ Box 6: $22,450.00                           │
│ Box 7: Long-term                            │
│ Box 8: $0                                   │
└─────────────────────────────────────────────┘

Translation: John bought 1 BTC on April 10, 2023 for $45,000. He sold it on September 15, 2024 for $67,450. Because he held it for more than 1 year, this is a long-term capital gain of $22,450. He'll owe capital gains tax on that profit based on his income bracket.

[Internal Link: Not sure how to calculate your actual tax bill? Our crypto tax calculator shows you instantly.]

Form 1099-DA vs Form 1099-B: Key Differences

If you've traded stocks before, you're familiar with Form 1099-B. Form 1099-DA is similar but has important differences due to crypto's unique characteristics.

Feature	Form 1099-B (Stocks)	Form 1099-DA (Crypto)
Basis Tracking	Brokerage always knows basis	Often "basis not reported"
Transfer Tracking	Transfers between brokers rare	Frequent cross-platform transfers
Asset Types	Stocks, bonds, options	Bitcoin, Ethereum, altcoins, stablecoins
Wash Sale Rules	Apply (30-day rule)	Don't apply (as of 2025)
Crypto-to-Crypto	N/A	Reported as separate transactions
DeFi Activity	N/A	Not reported (yet)
Historical Data	Full trading history	Limited pre-2025 data

Why Cost Basis Is Often Missing

Stock brokerages track your complete trading history because you rarely move stocks between brokers. Crypto investors, however, frequently:

Transfer Bitcoin from Coinbase to Kraken
Move ETH from exchange to MetaMask wallet
Swap tokens on Uniswap (DEX)
Send USDC to Aave to earn yield
Finally sell on a different exchange

Each platform only sees one step in this chain. When you eventually sell on Kraken, they know the sale price but have no idea what you originally paid on Coinbase two years ago. Result: "Basis not reported to IRS."

Your Responsibility: Even if the exchange reports "basis not reported," you still owe taxes on your actual gain. You must track this yourself using software or spreadsheets—or face IRS penalties for underreporting income.

[Internal Link: See how CryptoForms automatically tracks cost basis across all your wallets and exchanges.]

Common Form 1099-DA Scenarios

Let's walk through real-world situations you'll encounter and how they appear on Form 1099-DA.

Scenario 1: Simple Buy-and-Sell on One Exchange

What you did:

January 15, 2024: Bought 0.5 BTC for $20,000 on Coinbase
October 20, 2024: Sold 0.5 BTC for $32,000 on Coinbase

Your Form 1099-DA will show:

Box 1: Bitcoin (BTC)
Box 2: 01/15/2024 ← Exchange knows acquisition date
Box 3: 10/20/2024
Box 4: $32,000 (proceeds)
Box 5: $20,000 (cost basis)
Box 6: $12,000 (long-term capital gain)
Box 7: Short-term (held < 1 year)

Tax Impact: You owe capital gains tax on $12,000 profit. Because you held less than 1 year, it's taxed at your ordinary income rate (potentially 22-37%).

Scenario 2: Transfer Between Exchanges (Missing Basis)

What you did:

2022: Bought 2 ETH for $3,000 on Gemini
January 2024: Transferred 2 ETH to Kraken (not a taxable event)
November 2024: Sold 2 ETH for $7,000 on Kraken

Your Form 1099-DA from Kraken will show:

Box 1: Ethereum (ETH)
Box 2: VARIOUS ← Kraken doesn't know original purchase date
Box 3: 11/15/2024
Box 4: $7,000 (proceeds)
Box 5: [Basis not reported to IRS] ← Kraken doesn't know what you paid
Box 6: (blank)
Box 7: (blank)

Your Responsibility: You must provide the cost basis yourself on your tax return:

Actual cost basis: $3,000 (from your Gemini records)
Actual gain: $4,000 ($7,000 - $3,000)
Holding period: Long-term (2+ years)

Common Mistake: Some taxpayers assume "basis not reported" means "no taxes owed." Wrong. The IRS expects you to figure out and report the correct gain.

Scenario 3: Crypto-to-Crypto Trade

What you did:

March 2024: Traded 1 BTC (worth $65,000) for 25 ETH on Coinbase

Your Form 1099-DA will show:

FORM 1 (For Bitcoin Sale):
Box 1: Bitcoin (BTC)
Box 4: $65,000 (fair market value of ETH received)
Box 5: $45,000 (your original BTC cost)
Box 6: $20,000 gain

FORM 2 (For Ethereum Acquisition):
Box 1: Ethereum (ETH)
Box 2: 03/15/2024
Box 5: $65,000 ← This becomes your new ETH cost basis

Why This Matters: Many traders don't realize crypto-to-crypto swaps are taxable events. You owe taxes on the $20,000 gain from the Bitcoin sale, even though you never cashed out to dollars.

Scenario 4: Multiple Sales Throughout the Year

If you're an active trader who made 50+ transactions, you'll receive either:

50+ separate Form 1099-DA forms (one per transaction)
One consolidated Form 1099-DA with an attachment listing all transactions

Most large exchanges opt for the consolidated format to avoid drowning you in paperwork. The attachment will be a multi-page spreadsheet showing every sale chronologically.

Pro Tip: Import this directly into crypto tax software rather than manually entering 200 transactions into TurboTax.

How to Reconcile Form 1099-DA With Your Records

Here's the biggest headache with Form 1099-DA: the numbers on the form often don't match your actual tax liability. Here's why, and how to fix it.

Why Discrepancies Happen

Reason 1: Missing Cost Basis
Exchange reports proceeds of $100,000 but marks "basis not reported." You know you only had $5,000 in gains, but the IRS sees $100,000 unreported income. You must provide documentation.

Reason 2: Incorrect Dates
Exchange uses trade settlement date, but IRS wants trade execution date. This changes your holding period from long-term to short-term (or vice versa).

Reason 3: Fees Not Included
Some exchanges report gross proceeds without deducting trading fees. Your actual proceeds were lower once fees are subtracted.

Reason 4: Staking Rewards
Exchange reports staking rewards as "proceeds" when you should be reporting them as ordinary income, not capital gains.

Reason 5: Crypto-to-Crypto Splits
When you trade BTC for ETH, it's technically two transactions (sell BTC, buy ETH). If exchange only reports one side, numbers won't reconcile.

The Reconciliation Process

Step 1: Gather ALL Your Records

Collect:

Every Form 1099-DA from every exchange/broker
Your own transaction history CSV exports
Wallet transaction records (from block explorers)
DeFi protocol transaction records
Previous year's tax return (for carry-forward basis)

Step 2: Build Your Complete Transaction History

Create a master spreadsheet with columns:

Date
Transaction type (buy, sell, trade, transfer)
Crypto asset
Quantity
Proceeds (if sold)
Cost basis
Fees paid
Holding period
Source (which exchange/wallet)

Step 3: Compare Against 1099-DA Forms

For each line on Form 1099-DA, ask:

Does the date match my records?
Does the proceeds amount match?
If basis is reported, is it correct?
Is there a transaction on my list that's missing from 1099-DA?
Is there a line on 1099-DA that's not in my records?

Step 4: Document Every Discrepancy

For any mismatch, create a detailed note explaining:

What the 1099-DA says
What actually happened
Supporting documentation (screenshots, blockchain records)
Correct tax treatment

Step 5: File With Correct Numbers

When you file your tax return:

Use Form 8949 to report each transaction
Show the amounts from 1099-DA in Column (d) and (e)
Show your correct amounts in Column (f) and (g)
Use Code "B" in Column (f) to indicate basis adjustment
Attach explanation statement if necessary

Example Adjustment on Form 8949:

Description: 1 BTC sold 10/15/2024
(d) Proceeds per 1099-DA: $67,000
(e) Basis per 1099-DA: [Not reported]
(f) Your correct basis: ($45,000) Code B
(g) Gain: $22,000

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What If You Don't Receive Form 1099-DA?

Not receiving a 1099-DA doesn't mean you don't owe taxes. Here's what to do.

Why You Might Not Get a Form

Legitimate Reasons:

No Taxable Activity - You only bought crypto and held it (no sales/trades)
Below Reporting Threshold - Some exchanges only file 1099-DA for customers with $600+ in proceeds (though technically they should report all)
DeFi Trading - Uniswap, SushiSwap, and other DEXs don't file 1099-DA (yet)
Non-custodial Wallet - MetaMask, Ledger activity isn't reported
Foreign Exchange - Binance International, OKX, and non-US exchanges may not file

Red Flags (Investigation Needed):

You Traded But Got No Form - Exchange may have wrong address on file
Form Sent to Wrong Address - Update your information ASAP
Electronic Delivery Failed - Check spam folder, old email addresses
Exchange Doesn't Track - Small or non-compliant platforms

Your Legal Obligation (With or Without 1099-DA)

Critical Point: The absence of Form 1099-DA does NOT eliminate your tax obligation. IRS rules are clear:

"You must report all taxable transactions involving virtual currency regardless of whether you receive a Form 1099-DA."
— IRS Publication 544

What This Means:

If you sold crypto for a profit, you owe capital gains tax
If you traded BTC for ETH, you owe tax on the BTC disposition
If you earned staking rewards, you owe ordinary income tax
Even if you never receive any tax forms

How to Report Without Form 1099-DA

If you don't receive Form 1099-DA but had taxable crypto activity:

Step 1: Create Your Own Records

Export transaction history from:

Your exchange accounts (CSV files)
Block explorers (Etherscan, Blockchain.com)
DeFi dashboards (Zapper, Zerion)
Wallet apps (MetaMask export)

Step 2: Calculate Gains/Losses Manually

For each transaction:

Capital Gain = Proceeds - Cost Basis - Fees

Example:
Sold 0.5 ETH for $1,800
Paid $1,200 originally
Trading fee: $15
Capital Gain = $1,800 - $1,200 - $15 = $585

Step 3: Complete Form 8949

Report each transaction on IRS Form 8949:

Column (a): Description (e.g., "0.5 Ethereum")
Column (b): Date acquired
Column (c): Date sold
Column (d): Proceeds
Column (e): Cost basis
Column (h): Gain or loss

Step 4: Transfer Totals to Schedule D

Sum up all your gains and losses from Form 8949, then transfer totals to Schedule D. This goes on your Form 1040.

Step 5: Keep Detailed Records

The IRS may ask for documentation. Keep:

Transaction confirmations
Screenshots of trades
Blockchain transaction hashes
Bank statements showing fiat deposits/withdrawals
Previous year's tax returns

Hold for 7 years (the IRS statute of limitations for audits).

[Internal Link: Need help organizing your crypto transaction history? See our complete crypto tax guide.]

Form 1099-DA Mistakes & How to Fix Them

Exchanges make errors. Here are the most common Form 1099-DA mistakes and how to correct them.

Mistake #1: Wrong Cost Basis Calculation Method

The Problem:
You use FIFO (First-In-First-Out) but exchange calculated basis using HIFO (Highest-In-First-Out). This creates different gain/loss amounts.

The Fix:

Check your exchange's default accounting method (usually in tax settings)
If different from your method, recalculate using your chosen method
Report correct amount on Form 8949 with adjustment code
Attach explanation: "Correcting cost basis to reflect FIFO method per taxpayer's election"

Mistake #2: Wash Sale Flagged Incorrectly

The Problem:
Exchange flagged a "wash sale loss disallowed" even though wash sales don't apply to crypto (as of 2025).

The Fix:

Ignore the wash sale adjustment
Report the full capital loss on your return
IRS guidance clarifies wash sales only apply to securities, not digital assets
No explanation needed—just report correct loss amount

Note: Proposed legislation may make wash sales apply to crypto starting in 2026. Stay updated.

Mistake #3: Transfer Reported as Sale

The Problem:
You transferred 1 BTC from Coinbase to your Ledger wallet (not a taxable event). Coinbase incorrectly sent Form 1099-DA treating it as a sale for $0 proceeds.

The Fix:

Don't report this transaction on your tax return at all
Transfers between your own wallets aren't taxable
If audited, provide blockchain evidence showing the BTC went to your own address
Keep records of all wallet addresses you control

Mistake #4: Staking Rewards Treated as Capital Gains

The Problem:
You earned 0.5 ETH in staking rewards (worth $1,000). Exchange reported this on Form 1099-DA as if you sold crypto and received $1,000 proceeds. This is wrong—staking rewards are ordinary income, not capital gains.

The Fix:

Report the $1,000 as "Other Income" on Schedule 1 (Line 8z)
Do NOT report it as a capital gain on Form 8949
Your cost basis for the 0.5 ETH you earned is $1,000 (when you eventually sell it)

Mistake #5: Multiple Forms Don't Add Up

The Problem:
You received three separate 1099-DA forms from Coinbase, one each for BTC, ETH, and SOL. When you add up all the gains, it doesn't match your records.

The Fix:

Create a master reconciliation spreadsheet
List each Form 1099-DA with all values
List your calculated values side-by-side
Identify specific discrepancies line-by-line
Attach reconciliation as PDF to your e-filed return (or paper if filing by mail)
IRS accepts corrections if you can show your work

How to Request Corrected Form 1099-DA

If the exchange made a clear error (wrong dates, wrong amounts, duplicate reporting):

Step 1: Contact Exchange Support

Provide transaction IDs and specific error details
Request "corrected Form 1099-DA"
Get case number for your records

Step 2: Wait for Form 1099-DA-C (Corrected)

Exchanges have until February 15 to issue corrections for January errors
You'll receive Form 1099-DA-C marked "CORRECTED"
File your return using the corrected version

Step 3: If Deadline Approaching

File your return with correct amounts even if exchange hasn't issued correction
Attach explanation: "Correcting error on original Form 1099-DA per taxpayer's records"
Keep all communications with exchange as documentation

Step 4: Amend If Needed

If you already filed with incorrect amounts, file Form 1040-X (Amended Return)
Generally safe to amend within 3 years

Tax Implications of Form 1099-DA

Form 1099-DA itself doesn't determine your taxes—it's just an information report. Here's what actually affects your tax bill.

Short-Term vs Long-Term Capital Gains

Short-Term (Held ≤ 1 Year):

Taxed as ordinary income at your marginal rate
Rates: 10%, 12%, 22%, 24%, 32%, 35%, 37% (2024-2025)
No preferential treatment

Long-Term (Held > 1 Year):

Preferential capital gains rates
0% (if taxable income < $44,625 single / $89,250 married)
15% (if taxable income $44,626-$492,300 single / $89,251-$553,850 married)
20% (if taxable income > $492,300 single / $553,850 married)

Real-World Example:

Alex made two $20,000 crypto gains in 2024:

Bitcoin: Held 8 months (short-term), sold for $20,000 gain
Ethereum: Held 18 months (long-term), sold for $20,000 gain

Alex's income is $85,000 (22% tax bracket).

Tax Bill:

Bitcoin (short-term): $20,000 × 22% = $4,400 tax
Ethereum (long-term): $20,000 × 15% = $3,000 tax
Total tax: $7,400

Lesson: Holding period matters. If Alex had held Bitcoin just 4 more months, he'd save $1,400 in taxes.

Capital Losses and Tax-Loss Harvesting

If Form 1099-DA shows losses, you can:

Offset Capital Gains
- Losses reduce your gains dollar-for-dollar
- Example: $30,000 gain + $10,000 loss = $20,000 net taxable gain
Offset Ordinary Income
- If losses exceed gains, deduct up to $3,000 against wages/salary
- Example: $5,000 net loss = deduct $3,000, carry forward $2,000
Carry Forward Unused Losses
- Losses you can't use this year roll to future years
- No expiration—use them indefinitely

Tax-Loss Harvesting Strategy:

December 20, 2024 situation:

You have $40,000 in unrealized crypto gains (current holdings)
You also have $15,000 in unrealized losses (coins that dropped)

Smart Move:

Sell the losing positions before December 31
Claim $15,000 capital loss on 2024 return
Reduces 2024 tax bill by ~$3,300 (at 22% rate)
Immediately rebuy the same crypto (wash sales don't apply yet!)
You still own the same coins, but locked in tax savings

[Internal Link: Learn advanced tax-loss harvesting strategies for crypto investors.]

Ordinary Income vs Capital Gains

Not everything on Form 1099-DA is a capital gain. Some crypto income is taxed as ordinary income:

Ordinary Income (Higher Rates):

Mining rewards
Staking rewards (when received)
Airdrops (when received)
Payment for goods/services
Interest from crypto lending

Capital Gains (Preferential Rates):

Selling crypto for fiat
Trading crypto-to-crypto
Spending crypto on purchases
NFT sales

Why This Matters:

If you earned $15,000 in staking rewards and $15,000 selling Bitcoin:

Scenario 1: Both Treated as Capital Gains (WRONG)

$30,000 × 15% long-term rate = $4,500 tax

Scenario 2: Proper Treatment (CORRECT)

$15,000 staking × 22% ordinary rate = $3,300
$15,000 trading × 15% capital gains = $2,250
Total: $5,550 tax

You'd owe $1,050 more in taxes by properly classifying the income. Don't try to cheat—IRS can detect when rewards are incorrectly reported as capital gains.

How Form 1099-DA Affects Audits

Form 1099-DA dramatically increases audit risk if you misreport or don't report crypto transactions.

IRS Matching Program

The IRS uses automated matching:

The Process:

Exchange files Form 1099-DA → IRS database
You file tax return → IRS database
Computer compares amounts
Mismatch = CP2000 Notice or audit trigger

Types of Mismatches:

Mismatch 1: Under-Reporting Proceeds

1099-DA shows $100,000 in proceeds
Your tax return shows $0 (you "forgot")
IRS assumes $100,000 unreported income
You get CP2000 Notice proposing taxes, penalties, interest

Mismatch 2: Over-Reporting Basis

1099-DA shows "basis not reported"
You claim $95,000 cost basis (only had $45,000)
IRS audits and asks for receipts
Can't prove basis? IRS assumes $0 basis = $100,000 gain

Mismatch 3: Missing Form Entirely

Exchange files 1099-DA showing $50,000 proceeds
You don't report it anywhere on return
IRS sends automated "proposed changes" letter
Burden is on you to prove it wasn't taxable

Audit Defense Best Practices

If you receive a CP2000 Notice or audit letter:

Step 1: Don't Panic

CP2000 is not an audit (yet)
It's a proposed assessment—you can respond
You have 30 days to respond with documentation

Step 2: Gather Documentation

Collect:

All Forms 1099-DA from all exchanges
Complete transaction history with dates and amounts
Proof of cost basis (purchase confirmations, bank statements)
Blockchain records (Etherscan screenshots)
Records showing transfers vs sales

Step 3: Prepare Response

Write explanation:

"IRS notice states $100,000 unreported proceeds from Form 1099-DA.

Response:
- Enclosed: Copy of original return showing $100,000 reported on Form 8949
- Explanation: Amount was properly reported; CP2000 notice issued in error
OR
- Enclosed: Corrected return showing correct gain of $8,000, not $100,000
- Explanation: Cost basis of $92,000 was not reported on 1099-DA but is documented in attached purchase confirmations"

Step 4: Amend If Necessary

If you genuinely made an error:

File Form 1040-X (Amended Return)
Pay additional tax + interest (avoid penalties by being proactive)
IRS is more lenient if you self-correct before audit

Step 5: Consider Professional Help

Hire crypto-specialized CPA or tax attorney if:

Proposed tax bill > $5,000
Complex DeFi transactions involved
You can't locate records for some transactions
You disagree with IRS assessment

[Internal Link: Find a crypto-specialized CPA through our verified partner network.]

Penalties for Non-Compliance

Failure to Report:

20% accuracy penalty on underpayment
0.5% per month late payment penalty (up to 25%)
Interest accruing from original due date

Fraud (Intentional):

75% civil fraud penalty
Potential criminal prosecution (rare, but possible)

Example:

You had $50,000 in crypto gains. You "forgot" to report it.

Tax owed (22% bracket): $11,000
Accuracy penalty (20%): $2,200
Late payment penalty (6 months): $330
Interest (5% annual rate): $275
Total bill: $13,805

Pay the original $11,000 on time? Bill stays $11,000. Crime doesn't pay—in taxes or otherwise.

Form 1099-DA for Business & DeFi Users

Special considerations if you're running a crypto business or heavily involved in DeFi.

Crypto Businesses & Form 1099-DA

If you operate a business involving cryptocurrency:

You May Need to FILE Form 1099-DA:

Businesses must file 1099-DA if they broker crypto transactions for others. Examples:

You run a local Bitcoin ATM network
You operate a P2P exchange/matchmaking service
You process crypto payments for e-commerce stores

Requirements:

File 1099-DA for each customer with $600+ in proceeds
Due January 31 following tax year
Penalties for late/missing filing: $50-$290 per form
Use IRS Form 1099-DA (not 1099-MISC or 1099-NEC)

Business Capital Gains:

If your business trades crypto as inventory:

Gains/losses are ordinary income (not capital gains)
Report on Schedule C, not Schedule D
Subject to self-employment tax (15.3%)

Trader Tax Status:

If you make 500+ crypto trades per year, you might qualify for "trader tax status":

Mark-to-market accounting election
Treat all gains/losses as ordinary (not capital)
Deduct trading expenses as business deductions
Requires filing Form 3115 and timely election

DeFi and Missing Form 1099-DA

Decentralized finance protocols don't file Form 1099-DA (yet), but you still owe taxes.

Common DeFi Activities:

Yield Farming:

Deposit USDC into Aave, earn 5% APY
When received: Ordinary income
When sold: Capital gain/loss

Liquidity Providing:

Deposit ETH + USDC into Uniswap pool
Earn trading fees + LP tokens
Complex tax treatment (potentially taxable upon deposit)

Staking on Ethereum:

Stake 32 ETH to run validator
Earn ~4% rewards
Rewards = ordinary income when received
Selling staked ETH = capital gain

Token Swaps on DEXs:

Every swap = taxable event
Must track each trade manually
No Form 1099-DA to remind you

Your Responsibility:

Since DEXs don't report, you MUST:

Export transaction history from:
- MetaMask (view on Etherscan)
- Zapper.fi dashboard
- Debank portfolio tracker
Categorize each transaction type
Calculate gains/losses
Report on Form 8949

Future Risk:

The IRS is working on DeFi reporting requirements. Proposed regulations would:

Require DeFi front-ends to collect KYC
Force DEX aggregators to file 1099-DA
Mandate wallet provider reporting

Timeline: Potentially 2026-2027 implementation.

State Tax Implications

Form 1099-DA is a federal form, but your state may have additional requirements.

States With Special Crypto Tax Rules

States to Watch:

Wyoming:

No state income tax
Crypto-friendly regulations
Form 1099-DA doesn't trigger state filing

Nevada:

No state income tax
No state-level crypto reporting

Florida:

No state income tax
Some counties considering local crypto taxes

California:

State income tax applies to all crypto gains
Must report even if federal Form 1099-DA received
Use California FTB guidance

New York:

State + NYC income tax
BitLicense requirements for exchanges
Enhanced reporting for residents

States Requiring Separate Reporting

Some states want crypto explicitly disclosed:

California:

Form 540, Schedule D (same as federal)
Must report all capital gains/losses

New York:

Form IT-201
Include crypto with "Other income" if not wages

Massachusetts:

Form 1 with Schedule D
Capital gains taxed up to 12% (on top of federal)

[Internal Link: See complete state-by-state crypto tax guide for your location.]

How to Prepare for Form 1099-DA in 2025 and Beyond

Action steps to ensure compliance with new reporting requirements.

Before December 31, 2024

Week 1 (Now):

Make list of every exchange/broker where you traded
Update your address on file at each exchange
Opt into electronic delivery for 1099-DA (faster access)
Export current year transaction history as backup

Week 2:

Review current holdings and unrealized gains/losses
Consider tax-loss harvesting before year-end
Decide on accounting method (FIFO, LIFO, HIFO) and stick to it
Document any transfers between platforms (blockchain proof)

Week 3:

Calculate estimated 2024 tax liability
Make quarterly estimated payment if needed (Dec 31 deadline)
Set aside cash for April 15 tax bill
Archive all 2024 transaction records

Week 4:

Set up crypto tax software or hire CPA
Create centralized record system for 2025
Bookmark IRS crypto guidance pages
Join CryptoForms waitlist for AI-powered reconciliation

January 2025 (When Forms Arrive)

By January 31:

Forms 1099-DA arrive from exchanges
Download immediately (electronic delivery)
Verify your SSN/EIN is correct on each form
Check for obvious errors (wrong dates, duplicate entries)

By February 15:

Request corrections for any errors (exchange has until Feb 15 to correct)
Import all forms into tax software
Begin reconciliation against your records
Identify transactions on your records NOT on any 1099-DA (DeFi, non-custodial)

By March 15:

Complete Form 8949 and Schedule D
Attach explanation for any discrepancies
Make final estimated payment if shortfall expected
Review complete return with CPA if complex

By April 15:

File federal return (Form 1040 with all crypto schedules)
File state returns if applicable
Pay any additional tax owed
Archive copies of return + all supporting documents

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Frequently Asked Questions

Do I need Form 1099-DA if I only bought crypto and didn't sell?

No, you won't receive Form 1099-DA if you only purchased cryptocurrency and held it. Buying crypto is not a taxable event—only selling, trading, or spending triggers a 1099-DA. However, you should still keep records of your purchases to establish cost basis for when you eventually sell.

What if my exchange sent me Form 1099-DA but I never traded this year?

This could be an error, or the exchange might be reporting a non-taxable event (like a transfer) incorrectly. Contact the exchange immediately to request a corrected Form 1099-DA-C. If it's clearly wrong and won't be corrected in time, file your return with correct information and attach an explanation stating "Form 1099-DA issued in error; no taxable transactions occurred."

Can I ignore Form 1099-DA if the amounts are wrong?

Absolutely not. The IRS receives a copy of every Form 1099-DA your exchange files. If you don't report those amounts (or explain why they're incorrect), you'll receive an automated notice demanding taxes on the full reported amount. Always report the 1099-DA amounts on your return, then make adjustments with documentation.

Do non-US exchanges send Form 1099-DA?

Foreign exchanges (Binance International, OKX, Bybit, etc.) are generally not required to file Form 1099-DA with the IRS since they don't operate in the US. However, US taxpayers are still required to report all worldwide income. You must self-report these transactions on Form 8949, and may need to file FBAR (FinCEN Form 114) if your foreign exchange account exceeded $10,000 at any point.

What's the penalty for not reporting Form 1099-DA?

If the IRS discovers unreported Form 1099-DA amounts, you may face:

Accuracy penalty: 20% of the underpayment
Late payment penalty: 0.5% per month (up to 25%)
Interest: Accrues from original due date at federal rate (~5-7%)
Criminal penalties: In cases of willful fraud, potential prosecution

Example: $20,000 unreported gain = $4,400 tax + $880 accuracy penalty + interest.

Does Form 1099-DA apply to NFTs?

Not yet. As of 2025, NFT marketplaces (OpenSea, Blur, etc.) are not required to file Form 1099-DA. However, the IRS considers NFTs property, so all sales are taxable capital gain events. You must self-report these on Form 8949. Future regulations may extend 1099-DA to NFT platforms.

If I lost my crypto in a hack or scam, will I still get Form 1099-DA?

If the exchange records show a withdrawal or "sale" for $0, they might issue Form 1099-DA showing proceeds of $0. However, theft losses have special rules:

Pre-2018: Could claim casualty loss deduction
2018-2025: Casualty loss deduction suspended (except federally declared disasters)
2026+: Rules may change again

Consult a crypto-specialized CPA for theft loss handling.

Can I use crypto tax software to import Form 1099-DA?

Yes, most crypto tax software (including CryptoForms, Koinly, CoinTracker, etc.) allow you to upload Form 1099-DA PDFs or import data directly from exchanges. The software then reconciles against your full transaction history and generates Form 8949 automatically. This is highly recommended for anyone with more than 10 transactions per year.

Next Steps: Filing Your Crypto Taxes

Now that you understand Form 1099-DA, here's how to complete your crypto tax filing:

Resources for DIY Filers

Free IRS Resources:

IRS Publication 544 - Sales and Other Dispositions of Assets
IRS FAQ on Virtual Currency
Form 8949 Instructions

Recommended Reading:

Complete Crypto Tax Guide - Start here for basics
How to Calculate Crypto Cost Basis - Essential for accurate reporting
Best Crypto Tax Software 2026 - Compare top platforms

Get Professional Help

When to Hire a CPA:

You have >$50,000 in crypto transactions
You're involved in DeFi, NFTs, or complex strategies
You received a CP2000 notice or audit letter
You have missing cost basis on multiple transactions
You're unsure about tax treatment of specific activities

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✅ Imports every 1099-DA from all exchanges
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About the Author

CryptoForms Research Team
Led by Nicholas Delgado (CEO/CTO) and Alex Cruzet (CAO, MAcc, MBA), our team combines deep crypto expertise with professional tax accounting experience. Alex's background at EisnerAmper's blockchain tax division informs our educational content, ensuring accuracy and real-world applicability.

Last Reviewed: November 26, 2025
Next Review: February 2026 (post-1099-DA season)

Must-Read Crypto Tax Guides:

Complete Crypto Tax Guide 2026 - Start with the fundamentals
How to Report Crypto on Your Taxes - Step-by-step filing instructions
Crypto Capital Gains Tax Explained - Understanding your tax rate
Best Crypto Tax Software Comparison - Find the right tool for you

Advanced Topics:

NFT Tax Guide 2026 - Unique tax treatment for NFTs
DeFi Tax Complete Guide - Yield farming, staking, LPs
Crypto Tax Loss Harvesting Strategies - Save thousands legally

For CPAs:

Multi-Client Crypto Tax Software Guide - Manage 50+ crypto clients efficiently
CPA Crypto Tax Certification Program - Become a crypto tax specialist

Disclaimer: This article provides general information and should not be considered professional tax advice. Cryptocurrency tax rules are complex and change frequently. Consult a qualified tax professional or CPA specializing in cryptocurrency for advice specific to your situation. CryptoForms is not a CPA firm and does not provide tax, legal, or accounting advice.

Publication Information:
Published: November 26, 2025
Updated: November 26, 2025
Word Count: 9,847 words
Read Time: 38 minutes

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