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Cryptocurrency investors are preparing to enter a very different tax reporting environment as the first wave of Forms 1099-DA are issued for digital asset transactions. These forms, expected to arrive in early 2026, represent the federal government’s first comprehensive attempt to standardize third-party reporting of cryptocurrency activity and align digital asset compliance more closely with traditional securities reporting.

Form 1099-DA is designed to summarize gross proceeds from certain digital asset transactions and will be furnished both to taxpayers and the Internal Revenue Service (“IRS”). For the first time, exchanges, brokers, and payment platforms facilitating cryptocurrency transactions will be required to provide transaction information directly to the IRS, significantly expanding information reporting in the digital asset space. While policymakers have prioritized cryptocurrency compliance for several years, the introduction of standardized reporting statements marks a fundamental shift in enforcement and audit risk for investors.

Despite the importance of the new forms, awareness among taxpayers remains limited. Tax professionals anticipate that many investors will be surprised by the volume and content of these statements, particularly where the reported information does not fully reflect the taxpayer’s actual gain or loss. Because the forms will report gross proceeds rather than net taxable income, taxpayers may need to reconcile discrepancies arising from incomplete transaction histories, transfers between wallets, or activity across multiple platforms.

The reporting framework stems from provisions enacted as part of the Infrastructure Investment and Jobs Act of 2021, enacted in response to the rapid growth of cryptocurrencies, nonfungible tokens, and other digital assets. Final Treasury and IRS regulations issued in August 2024 treat digital asset brokers in a manner similar to securities brokers and establish a phased compliance regime over several tax years.

For tax year 2025, the reporting obligation will apply to cryptocurrency exchanges, fintech platforms, and other entities that facilitate digital asset transactions. These entities must report gross proceeds from taxable crypto sales and provide Form 1099-DA to taxpayers by February 17, 2026. The IRS has indicated that transitional relief from penalties will be available for brokers making good-faith efforts to comply during the initial rollout.

Notably, the initial reporting regime does not require brokers to report cost basis. Unlike Form 1099-B for securities transactions, which reflects both proceeds and basis, Form 1099-DA will not include acquisition cost information for the upcoming filing season. Cost basis reporting for certain covered digital assets is scheduled to begin with the 2026 tax year. As a result, taxpayers will remain responsible for tracking their own basis and calculating gains or losses, often across multiple exchanges and wallets. 

Adding to the complexity, federal reporting obligations do not displace state requirements. States may impose separate reporting thresholds, disclosure rules, and filing deadlines related to digital asset transactions, increasing the compliance burden for taxpayers and financial institutions alike.

As Form 1099-DA becomes part of the annual tax reporting landscape, taxpayers, brokers, and advisers should anticipate increased scrutiny and be prepared to devote additional time to reconciling reported information with underlying transaction data. Early preparation, careful recordkeeping, and coordination across platforms will be critical as the digital asset reporting regime continues to evolve. If you have any questions about this update, please contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit the firm’s Tax Practice page.