IRS Form 1099-DA: What Taxpayers Need to Know
For taxpayers, navigating IRS forms is complicated enough as-is. Now that new tax reporting rules for centralized crypto exchanges have been proposed, another document covering these regulations is available for review.
Unless you’d prefer to read through the official 282-page document surrounding 1099-DAs, I’ve broken down the need to know below. For context, DA refers to Digital Assets.
1099-DA Background Information
Since the popularization of cryptocurrency, the IRS has been on the lookout for unreported income through audits and other means. To maximize compliance and transparency, the proposed 1099-DA form will be required by “digital asset brokers” starting in January of 2026.
In the meantime, the IRS plans to accept, and possibly incorporate feedback from the public. For this reason, we can get an early look at these new requirements.
What Constitutes a Digital Asset Broker?
Although the aforementioned document includes an in-depth explanation of what a digital asset broker means, they are primarily referring to centralized and decentralized exchanges, physical ATMs and kiosks that deal in cryptocurrency, and wallets that allow for crypto trading, buying, and selling.
Specific examples include, but are not limited to:
• Uniswap
• Binance
• Coinbase
• Crypto.com
• Gemini and beyond
The Effect on Taxpayers
On a high level, 1099-DAs give the IRS a third-party view of your crypto activity with a focus on taxable events. From there, they compare what you’ve reported to the new records they have on file.
As a taxpayer with crypto activity, this means sorting out various 1099-DAs across any wallets or exchanges you may use. From there, the IRS can conduct information matching to determine any inaccuracies or penalties. The information here includes cost basis payments, dates for trades such as acquisitions, proceeds, and more.
Given that the form will go into effect January of 2026, any activity after January 1st, 2025 would be captured by the 1099-DA. Although this includes the first year of activity, the additional transparency will also help the IRS identify previously unreported income, a reminder of the importance of thorough crypto tax reconciliation with your accountant.
Projected Problem Areas
Given that many people use multiple crypto exchanges, 1099-DAs are likely to create administrative headaches surrounding tax time. These include:
• Self-transfers that may appear as taxable sales
• Missing numbers across exchanges from unshared information
• Overstated gains through differing cost basis calculation methods and more
According to the official document, “written or electronic comments must be received by October 30, 2023.” Although there is still time as of this article for changes based on public feedback, the proposed regulations as they stand do not adequately address these concerns.
As a result, taxpayers are at risk of overpaying due to a miscalculated tax liability or underreporting their digital asset income, thereby increasing their chances of an audit.
Upon closer inspection, these reports seem to alleviate taxpayers from conducting their own calculations. Instead, however, problems arise from individuals with multiple exchanges as well as those with historical inaccuracies for even a single exchange. Additionally, universal calculations that were once accurate may show up differently on the official reports due to differences in cost basis calculations, as mentioned above.
These challenges further increase the importance of a seasoned crypto tax accountant to avoid costly mistakes.
Staying in Compliance
To avoid the reporting pitfalls of multiple 1099-DAs, I encourage you to consider my borderless crypto tax services, available through my website.
As a crypto tax accountant who is always current on the ever-evolving regulatory landscape, I can take the time-intensive burden of crypto taxes off your plate. Ultimately, these new reporting rules give the IRS even more tools to identify noncompliance. From there, even seemingly minor reporting mistakes could lead to a major audit. Together, we can avoid the myriad of projected paperwork headaches associated with 1099-DAs.