The Form Nobody Read
In late January 2026, Coinbase emailed roughly nine million American customers a tax form most of them had never heard of. The subject line was anodyne. The PDF inside was a one-page IRS form labeled 1099-DA. For some users it was blank. For active traders, it ran to dozens of lines and listed every disposal of every digital asset they had touched on the platform during 2025.
The same form was filed with the IRS. Kraken sent theirs in early February. Robinhood Crypto, Gemini, Bitstamp, BlockFi successor entities — all of them, all on the same federally mandated schedule. By February 28, the IRS had received gross-proceeds data on essentially every retail crypto transaction at a US-regulated custodial broker.
The crypto industry spent four years arguing about this form. The Treasury proposed it in 2023, finalized it in 2024, watered down a key piece of it in April 2025, and shipped the first wave in 2026. Most American crypto holders only noticed when the form landed in their inbox.
What follows is what the form actually reports, what it conspicuously doesn't, and why the 2025 vintage is structurally different from what's coming in 2027.
§ 01What 1099-DA Actually Reports
The form is the crypto sibling of the 1099-B (which has reported stock sales for decades) and 1099-K (which reports payment-processor gross). It captures, per transaction:
- The asset. Bitcoin, ether, USDC, an NFT, a memecoin. Each disposal is itemized by token type and quantity.
- The acquisition and disposal dates. When you bought (or transferred in), when you sold (or transferred out).
- The gross proceeds. Dollar value at the moment of disposal. This is the headline number.
- The transaction ID. A hash or internal identifier that lets the IRS cross-reference with on-chain data.
- The broker. Name, EIN, and reporting basis.
What counts as a "broker" for this purpose is narrower than the crypto industry feared and broader than it hoped. The final Treasury rule (Reg. § 1.6045-1, finalized June 2024) defines a digital asset broker as any person who, in the ordinary course of business, "stands ready to effect sales of digital assets at the direction of customers." In practice that's:
- Centralized exchanges that hold customer funds (Coinbase, Kraken, Gemini, Bitstamp)
- Brokerage platforms that route to crypto (Robinhood, Webull, eToro US)
- Crypto-payment processors above certain volume thresholds (BitPay, certain on-ramps)
- Some stablecoin issuers in their redemption capacity
What's not a broker, after the April 2025 carve-out: anyone who doesn't custody the underlying asset. Uniswap is not a broker. MetaMask is not a broker. A self-hosted Ledger or Trezor wallet is not a broker. We'll come back to why that distinction is doing far more work than the industry will admit publicly.
§ 02The Cost Basis Gap (and Why 2026 Is Worse)
Here's the structural quirk that's catching tax preparers off guard this filing season.
For 2025 transactions — the ones reported on the 1099-DAs filed in early 2026 — the form lists gross proceeds only. There is no cost basis column. The IRS gets "you sold $87,400 of bitcoin in 2025." It does not get "you sold $87,400 of bitcoin you originally bought for $61,200."
This isn't an oversight. Treasury phased the rule in deliberately, because basis tracking across crypto wallets is messier than basis tracking on traditional brokerages. Coinbase doesn't necessarily know what you paid for the bitcoin you deposited into Coinbase from your hardware wallet two years ago. Forcing brokers to report a basis number they don't actually have was a recipe for litigation.
So the schedule is staged:
- 2025 transactions (reported 2026): gross proceeds only. Basis is the taxpayer's problem, reported on Form 8949 attached to Schedule D.
- 2026 transactions (reported 2027): gross proceeds and cost basis for assets the broker has tracked basis on. For "covered" tokens acquired and disposed within the same broker, the basis will appear on the 1099-DA. For assets that were transferred in from elsewhere, basis may still be reported as "noncovered" or blank.
The implication for 2025 returns being filed right now: the IRS sees a $87,400 disposal on your 1099-DA and your return reports, say, $26,200 of gain. The IRS doesn't have a basis number to validate that. It has the disposal. It will see whether you reported some gain figure for that asset, but the size of the gain is functionally on the honor system this year.
Next year, that gap closes. For 2026 transactions, the broker will report what they think the basis was. If your Form 8949 says basis was $61,200 and the broker's records say it was $48,000 (because you transferred in tokens at a different acquisition price), you've now created an automated mismatch flag. That flag is exactly the kind of thing the IRS Information Returns Processing system surfaces for correspondence audits.
§ 03The DeFi Carve-Out That Wasn’t Supposed to Happen
The original Treasury regulation, as finalized in late 2024, would have extended 1099-DA reporting obligations to decentralized brokers. The intent was to capture DEX activity — Uniswap, Curve, dYdX, GMX — under the same reporting umbrella as Coinbase.
The mechanics were going to be ugly. DEXs don't custody assets, don't collect KYC, don't have a "customer" in the traditional broker-customer sense. They run on autonomous smart contracts. Forcing a "DeFi broker" to identify the user behind a wallet address and issue them a 1099-DA was, depending on whom you asked, either a thoughtful extension of existing securities regulation or a structural impossibility that would force every meaningful DeFi protocol to either geofence the US or shut down entirely.
Congress sided with the second interpretation. In April 2025, both chambers passed H.J.Res.25, a Congressional Review Act resolution disapproving the DeFi broker rule. President Trump signed it. The rule was struck. DeFi protocols, non-custodial wallets, and DEXs have no 1099-DA filing obligation.
What this means in practice, said plainly: the IRS gets near-perfect visibility into US-custodial crypto activity. It gets almost none into DeFi activity at the broker level. The tax obligation on the user is unchanged — a swap on Uniswap is still a taxable event, gain or loss reported on Form 8949 — but the IRS no longer has an automated data feed for it.
The natural prediction was that activity would migrate. The data so far is mixed. Chainalysis and similar on-chain analytics shops have reported a modest uptick in DEX volume from US-attributable wallets in Q1 2026, but nothing approaching the wholesale migration that some industry commentary anticipated. Centralized brokers remain dominant for retail users, mostly because the alternative requires self-custody and the operational confidence to manage it.
The longer-term question is whether Treasury writes a narrower replacement rule. The April 2025 resolution doesn't permanently bar Treasury from regulating DeFi reporting — it strikes that specific rule. A future Treasury could draft a more targeted version. As of May 2026 there's no public draft of one.
§ 04The Per-Wallet Rule and the Safe Harbor
Buried inside the same Treasury rulemaking that produced 1099-DA was a much more consequential change for active traders: the death of universal basis tracking.
Before January 1, 2025, the IRS broadly permitted taxpayers to track crypto basis across all wallets and accounts in aggregate. If you bought a bitcoin on Coinbase in 2019, transferred it to your hardware wallet in 2022, and sold it on Kraken in 2024, you could apply a first-in-first-out or specific-identification method across the entire holding history. Most reputable crypto tax software (Koinly, CoinTracker, TokenTax) defaulted to universal tracking.
Effective January 1, 2025, that ended. The new rule requires wallet-by-wallet basis tracking. Each wallet, each exchange account, is its own basis silo. The bitcoin sitting in your Kraken account doesn't get to "use" the basis from a bitcoin you bought four years ago on Coinbase, even if you intended them to be fungible.
For most casual holders, this is a non-event. For active traders who built portfolios assuming universal tracking — particularly anyone doing lot-optimization for tax purposes — the rule change forces a one-time basis re-allocation across wallets as of January 1, 2025.
The IRS provided cover for this transition in Rev. Proc. 2024-28. The procedure offers two safe harbors:
- Specific Unit Allocation. The taxpayer documents, by January 1, 2025 (or the date of the first 2025 disposal, whichever is earlier), which specific units of each digital asset are sitting in which wallet, with their original acquisition cost. This is the "I kept good records" route.
- Global Allocation. The taxpayer allocates remaining unsold units to wallets in a documented, consistent way (typically by acquisition date — earliest acquired goes to whichever wallet, etc.). Less precise but acceptable if records are incomplete.
If you did neither, technically the safe harbor doesn't apply. In practice the IRS isn't going to refuse to process a return that uses good-faith reconstruction, but the formal protection of the Revenue Procedure requires one of those two methodologies, documented by the deadline.
§ 05How the IRS Matches the Form to Your Return
The mechanics of 1099 matching are not glamorous, but they're worth understanding because they tell you what the IRS will actually do with this data.
Every 1099 filed with the IRS — whether 1099-NEC, 1099-MISC, 1099-K, 1099-B, or now 1099-DA — flows into the Information Returns Master File. When you file your 1040, the IRS's Automated Underreporter (AUR) system compares the income you reported against the income reported about you on every 1099. Discrepancies above a threshold (varies by year, generally several hundred to a few thousand dollars) generate a CP2000 notice.
A CP2000 is not an audit. It's an automated letter that says, in effect: "We received information that you had $X of additional income that doesn't appear on your return. Here's the proposed additional tax. You have 30 days to respond." If you ignore it, the proposed tax becomes assessed tax.
For 1099-DA in 2026, the matching is going to be lumpy. Because basis isn't on the form yet, the AUR system can't say "your gain is wrong." It can only say "we see you had $87,400 of crypto disposals on Coinbase, and your return reports zero crypto activity, please explain." That second case is the one that generates letters in volume this filing season.
For 2026 transactions reported in 2027, matching gets sharper. The IRS will have proceeds and (for covered tokens) basis. Mismatches on basis become CP2000s. The cost of sloppy tracking goes from "the IRS doesn't know to ask" to "the IRS asks automatically."
This is the same trajectory that 1099-B reporting followed in the 2011–2013 wave when basis reporting was added to stock sales. The volume of CP2000 notices roughly tripled in the three years after basis became mandatory. The crypto curve will look similar.
§ 06If You Have Unreported Prior Years
The honest version: a meaningful share of US crypto holders have years where they sold or swapped tokens and didn't report it. The 2020–2022 bull market produced a lot of taxable events, and a lot of returns that didn't capture them.
What changed in 2026 isn't the legal obligation — that's been on the books since the IRS's 2014 guidance treating crypto as property. What changed is that the IRS now gets a structured data feed from major brokers for 2025 onward, and that data feed includes historical account information, not just current-year transactions. The 1099-DA filing produces a customer record that includes when the account was opened. The IRS can — and will — extrapolate that a 2020 Coinbase customer who reported zero crypto activity on their 2020 return is worth a look.
The standard remediation paths:
- Amended returns (Form 1040-X) for the open years. The standard limitations period is three years from the original filing date, six years if there was a substantial omission (more than 25% of gross income), unlimited for fraud. For most non-fraudulent omissions, the practical scope is the past three filed years.
- Voluntary Disclosure Practice (VDP). For taxpayers with willful or potentially criminal exposure. Filed through IRS Criminal Investigation. Provides civil resolution and effectively shields against criminal referral, in exchange for full disclosure, payment of tax and interest, and a civil fraud penalty. This is the route if the unreported gains are large and the omission wasn't an honest oversight.
- Streamlined Filing Compliance Procedures. These exist for non-willful failures involving foreign assets and accounts (see our FBAR guide). They do not apply to purely domestic crypto cases on US exchanges. If your unreported activity was on a foreign exchange (Binance international, Bybit, KuCoin) and you're a US person, Streamlined may be in play for the FBAR side of the obligation; the income tax side still goes through amended returns.
The thing not to do: assume that because you cashed out years ago and the funds are now in your bank account, the IRS won't backtrack. They will. Bank records are subpoena-able, exchange records are now structured 1099 data, and matching against historical returns is automated at this point.
§ 07Key Takeaways
- Form 1099-DA is live. US-custodial crypto brokers issued the first wave in early 2026 for 2025 transactions. Coinbase, Kraken, Robinhood Crypto, Gemini, and similar platforms now report your gross proceeds directly to the IRS on the same schedule as stock brokerages.
- Cost basis is not on the form yet. 2025 1099-DAs show gross proceeds only. Basis reporting begins for 2026 transactions, filed in 2027. Until then, basis is the taxpayer's job on Form 8949.
- DeFi protocols and DEXs were carved out. Congress repealed the decentralized broker rule under the Congressional Review Act in April 2025 (H.J.Res.25). Uniswap, MetaMask, hardware wallets, non-custodial swaps — no 1099-DA filing. The user's tax obligation is unchanged; the IRS just doesn't get an automatic feed.
- Universal basis tracking is dead. Effective January 1, 2025, crypto basis must be tracked per wallet, not in aggregate. Rev. Proc. 2024-28 offers two documented safe harbors for the one-time re-allocation.
- The matching will tighten in 2027. When basis reporting goes live for 2026 transactions, the IRS Automated Underreporter system will start flagging basis mismatches the same way it currently flags missing 1099-B income. Expect CP2000 letter volume on crypto returns to multiply.
- Prior-year omissions don't get safer with time. Amended returns for the past three years are the standard path for honest oversights. Voluntary Disclosure Practice exists for larger or willful exposures. Streamlined Procedures cover foreign-account cases, not domestic exchange cases.
If you need to size the actual tax owed on a crypto disposal at your federal bracket, the US calculator handles capital gains at long- and short-term rates. The capital gains guide walks through the bracket math. The expat filing guide covers the FBAR side for anyone holding crypto on a foreign exchange.
Disclaimer: Figures, dates, and regulatory citations are drawn from IRS Form 1099-DA and 8949 instructions, Treasury Regulation § 1.6045-1 (finalized June 2024), Revenue Procedure 2024-28 (per-wallet basis safe harbor), and H.J.Res.25 (signed April 2025). Form 1099-DA reporting obligations apply to "custodial digital asset brokers" as defined in the final rule; the perimeter of that definition continues to be the subject of industry interpretation. This article is informational and does not constitute tax, legal, or financial advice. Consult a qualified CPA, enrolled agent, or tax attorney before acting on any of it.