Form 1099-DA: Definition and How It Works

Form 1099-DA is an IRS information return that requires custodial digital asset brokers — including centralized cryptocurrency exchanges such as Coinbase, Kraken, Gemini, and Robinhood — to report gross proceeds from client sales and exchanges of digital assets to the IRS and to the account holder. Authorized under IRC §6045 as amended by the Infrastructure Investment and Jobs Act of 2021 (Pub. L. 117-58), and governed by Treasury final regulations published in June 2024 (T.D. 9988), Form 1099-DA brings digital asset transactions into the same information-reporting framework that applies to securities (Form 1099-B) and broker-reported real estate proceeds. Beginning with tax year 2025, covered brokers are required to issue Form 1099-DA by January 31 of the following year for any customer who sold or exchanged digital assets through their platform during the calendar year.

What Form 1099-DA Reports

Form 1099-DA captures information at the transaction level. For the 2025 tax year — the first year the form is required — covered brokers report:

  • Gross proceeds from each sale or exchange of a digital asset, expressed in U.S. dollars based on the fair market value at the time of the transaction
  • Date of acquisition and date of sale or exchange for each lot sold, which determines whether the gain or loss is short-term or long-term
  • Description of the digital asset (e.g., Bitcoin, Ether, USDC)
  • Customer TIN and account identification for IRS matching against the taxpayer's Form 8949 and Schedule D

What Form 1099-DA does not report for 2025: Under IRS Notice 2026-20, the IRS extended transition relief on cost basis and gain/loss reporting. Most brokers will not report adjusted basis or the resulting gain or loss on the 2025 form. This means Form 1099-DA will show gross proceeds but not the taxpayer's profit or loss — the taxpayer (and their CPA) must independently determine cost basis, apply the correct identification method (FIFO, specific identification, etc.), and calculate the net gain or loss reportable on Form 8949. IRS Notice 2024-56 provided earlier transition guidance, and the IRS has indicated cost basis reporting will phase in as brokers build the necessary infrastructure.

Why Form 1099-DA Creates CP2000 Exposure

The IRS now receives a proceeds trail from every centralized exchange transaction. If a taxpayer's Form 8949 and Schedule D omit or underreport cryptocurrency proceeds, the IRS's automated CP2000 underreporter matching program will flag the discrepancy between the proceeds on Form 1099-DA and the amounts reported on the return. Because cost basis is not yet reported by the broker, the IRS will not know the taxpayer's gain or loss — but it will know that proceeds existed. CPAs should treat Form 1099-DA with the same diligence as Form 1099-B: every lot reported on the form must appear on the client's Form 8949, even if the ultimate gain or loss is zero or negative.

Scope of Coverage: What Is a "Covered Broker"

For tax year 2025, the 1099-DA requirement applies to custodial brokers — entities that take possession of a customer's digital assets and execute transactions on their behalf. This primarily means centralized exchanges with U.S. customers. The final regulations explicitly exclude the following from immediate reporting requirements:

  • Decentralized exchanges (DEXs) that do not take custody of assets — Uniswap, dYdX, and similar platforms are not covered brokers under the 2025 rules
  • Non-custodial wallet software — software wallets (MetaMask, Exodus) and hardware wallets (Ledger, Trezor) do not have reporting obligations
  • Peer-to-peer transactions where no intermediary takes custody

The IRS has indicated that non-custodial broker reporting rules will be addressed in future rulemaking. Until then, off-exchange activity — DeFi transactions, self-custody transfers, and peer-to-peer sales — must still be reported by taxpayers under the general property rules of IRC §1001, but will not appear on any Form 1099-DA.

How CPAs Use Form 1099-DA

CPAs encounter Form 1099-DA as a reconciliation input during tax preparation, not as a complete gain/loss statement. The practical workflow involves:

  1. Collect every Form 1099-DA the client received — clients with multiple exchange accounts may receive forms from several brokers, each covering only that platform's transactions
  2. Reconcile broker proceeds against client records — compare the proceeds figures on each 1099-DA against the client's own transaction history exported from the exchange. Errors in proceeds reporting (mismatched trade dates, staking rewards misclassified as sales) are common in the first years of a new form
  3. Determine cost basis independently — since most brokers are not yet reporting basis, CPAs must reconstruct it from exchange records, prior-year returns, and any off-platform acquisition records
  4. Report on Form 8949 — each sale or exchange reported on a 1099-DA generates a separate line on Form 8949, classified as short-term (Box A or B) or long-term (Box D or E) depending on the holding period. Proceeds not reported on a 1099-DA (DeFi, self-custody sales) go in the "other" rows (Box C or F)
  5. Document the reconciliation — retain the cost basis workpapers, exchange exports, and reconciliation memo in the client file in the event of an IRS inquiry

For a complete step-by-step guide to managing 1099-DA workflows in the 2026 filing season, see Form 1099-DA: How CPAs Should Handle Crypto Broker Reporting for 2025 Returns.

Related Terms

  • Capital Gains — the taxable profit from a digital asset sale, determined by comparing proceeds against adjusted basis
  • Backup Withholding — a 24% withholding obligation that applies to 1099-reportable payments, including broker proceeds, when the recipient has not provided a valid TIN
  • Cryptocurrency Tax Reporting — how CPAs handle the full spectrum of client digital asset activity, including off-exchange transactions not captured by Form 1099-DA