Form 1099-DA is the IRS information return created to standardize third-party reporting for sales and exchanges of digital assets. Starting with 2025 activity, many platforms will furnish Form 1099-DA to customers and file it with the IRS in early 2026. This increases IRS matching and notice risk when tax return reporting does not reconcile with broker-reported proceeds.
1099-DA vs. 1099-K: The Connection
Form 1099-K is a long-standing form for payment card and third-party network transactions. Historically, it appeared in crypto contexts when platforms treated activity as payment processing volume. The issue is that 1099-K generally reports gross payment volume, not gain or loss, and can be misleading if treated as taxable income rather than a reconciliation data point.
Form 1099-DA represents a policy pivot: it is designed specifically for digital asset broker reporting, so crypto activity is no longer forced into a payment processor reporting framework. Practically, many taxpayers who previously received a 1099-K in certain crypto contexts should expect the 1099-DA to become the more relevant form for trading-style dispositions, while the 1099-K may remain relevant where the activity is truly payment-network driven.
Perspective 1: Taxpayers (Individuals and Corporations)
What To Expect in 2026 for 2025 Activity
Many U.S. crypto platforms and intermediaries will furnish Form 1099-DA and file it with the IRS. This creates a stronger third-party data trail, and mismatches are more likely to surface through automated matching when broker-reported proceeds do not align with what is reflected on the return.
What Form 1099-DA Does Not Do
Form 1099-DA is not a complete tax calculation. Taxpayers still need to compute gains or losses using a supportable cost basis and holding period data, and separately capture ordinary income items that may not be reflected on the form (e.g., staking rewards or airdrops).
Common Mismatch Drivers That Taxpayers Should Plan Around
- Crypto-to-crypto swaps and other exchanges can trigger taxable dispositions, which taxpayers often underreport when focusing only on fiat cash-outs.
- Transfers between wallets and platforms can create confusion if records are incomplete or if internal transfers are not linked as non-taxable movements.
Taxpayer Readiness Checklist
- Maintain complete exchange and wallet histories.
- Reconcile transfers across platforms so internal movements are documented as transfers rather than dispositions.
- Use Form 1099-DA as a tie-out to what is ultimately reported on Form 8949 and Schedule D.
- Retain clear written explanations for differences when broker reporting does not capture the full facts or when classifications differ from the return position.
Elections and Key Settings To Address Now
The operational equivalent of an election for many taxpayers is the cost basis method and lot selection approach used consistently across activity. The increased broker reporting environment makes it important to:
- Document the chosen approach (e.g., FIFO vs. specific identification).
- Maintain records that support how lots were selected at the time of disposition.
- Implement wallet-level tracking for accurate basis support across multiple accounts and custody locations.
Gain Control Over Your Digital Asset Taxes
With the IRS Form 1099-DA December 31 deadline fast approaching, now is the time to ensure your crypto reporting is accurate and complete. Withum’s crypto-savvy team can help you stay compliant and optimize your tax position.
Perspective 2: Issuers (Brokers, Exchanges and Platforms)
Who Has an Obligation To Issue Form 1099-DA?
The obligation generally falls on businesses treated as brokers for digital asset transactions under Treasury and IRS broker reporting rules. In practice, this includes centralized exchanges and other intermediaries that affect sales or exchanges and have the customer relationship and reporting visibility needed to generate information returns.
What Issuers Should Be Building Toward
Issuers need an end-to-end compliance program that covers:
- Customer data collection
- Transaction identification and classification
- Valuation methodology
- Form generation, filing, and corrections
In early years, many programs will emphasize proceeds reporting and transaction detail capture, with reporting expanding as the regime matures.
Operational Focus Areas That Reduce Issuer Risk
Data quality and classification are crucial because customers will compare forms to their internal records and tax software outputs, and mismatches will lead to disputes, corrections, and reputational issues.
Key Takeaways
Form 1099-K historically reported payment-network volume and often created confusion for crypto taxpayers because it did not report cost basis or actual gain or loss. Form 1099-DA is intended to be the better fit for digital asset sales and exchanges by standardizing broker reporting and increasing IRS matching. The practical takeaway is that taxpayers and businesses should treat 1099-DA as a reconciliation anchor and invest in:
- Clean transaction records
- Consistent cost basis methodology
- Clear documentation for transfers and complex activity
Author: Harman Dhanda, CPA | [email protected]
Contact Us
For more information on this topic, reach out to our Digital Currency Accounting and Tracking Services Team.
