For years, crypto tax reporting has lived in a strange world where taxpayers were expected to self-report everything while the IRS had limited third-party visibility. That era is ending.
Starting with 2025 transactions, custodial crypto platforms must begin reporting certain digital asset sales and exchanges on a new IRS information return: Form 1099-DA (Digital Asset Proceeds From Broker Transactions).
That means more taxpayers will receive crypto tax forms that look and feel a lot like the brokerage forms we have dealt with for decades.
Convenient? Eventually.
Pain-free? Do not get carried away.
What Is Form 1099-DA?
Form 1099-DA is the IRS's new reporting form designed specifically for digital asset proceeds from broker transactions.
Brokers report transactions to both:
- The taxpayer (so you can prepare your return)
- The IRS (so they can compare your return to what was reported)
First forms: You will start seeing 2025 transaction reporting in early 2026.
Who Has to Report (and Who Does Not)?
The reporting rules focus on brokers that take custody (possession) of the digital assets they help you sell or exchange, including:
- Custodial trading platforms (centralized exchanges)
- Certain hosted wallet providers
- Digital asset kiosks
- Certain payment processors that take possession of the crypto (PDAPs)
The final rules do not impose reporting requirements on "non-custodial" brokers that do not take possession of the crypto being sold or exchanged (often called decentralized or non-custodial brokers).
Also: Real estate professionals treated as brokers have special reporting rules that begin with closings on or after January 1, 2026, when digital assets are used in real estate transactions.
What Gets Reported for 2025 (and What Changes in 2026)?
For 2025 Transactions (Reported in 2026)
For sales a broker effects in calendar year 2025, brokers generally report:
- Gross proceeds (what you received)
- Identifying and transaction details
They are not required to report cost basis for 2025 sales.
For 2026 Transactions and Later
Beginning January 1, 2026, brokers must report:
- Gross proceeds
- Basis on certain transactions, specifically those involving "covered securities"
Here is the crucial point: for Form 1099-DA, a "covered security" is generally a digital asset acquired after 2025 in a custodial account and held in that same account until disposition.
If it was acquired elsewhere or transferred in, it usually is not "covered" for mandatory basis reporting.
So yes, basis reporting improves, but it is not an instant fix for every wallet and every transfer you have ever made.
What Transactions Are Covered?
The rules apply to broker-effected dispositions of digital assets in exchange for things like:
- Cash or stored-value cards
- Other digital assets
- Services
- Certain other property exchanges (with special rules depending on the broker type)
Some transaction types are temporarily carved out of reporting until further guidance, including:
- Wrapping and unwrapping
- Liquidity provider transactions
- Staking transactions
- Certain lending-like transactions
- Short sales
- Notional principal contracts
De Minimis Thresholds (The "Do Not Bother Reporting This" Rules)
To keep reporting from becoming absurd for small-dollar activity, there are de minimis exceptions tied to optional reporting methods:
- PDAP (Payment Processor) Sales:
Not required to report if a customer's PDAP sales are ≤ $600 per year.
If the customer exceeds $600, all of that customer's PDAP sales get reported. - Qualifying Stablecoins (Optional Method):
Designated sales need not be reported if annual gross proceeds (net of allocable transaction costs) do not exceed $10,000. - Specified NFTs (Optional Method):
Sales need not be reported if annual gross proceeds (net of allocable costs) do not exceed $600.
What This Means for Taxpayers: Practical Takeaways
- Expect New Forms, but Do Not Assume They Are Complete (Especially for 2025)
For 2025, many taxpayers will receive 1099-DAs showing proceeds only. You still need your own records (or good software) to calculate gains and losses accurately. - Basis Reporting Improves in 2026, but Only for "Covered" Assets
If you buy and sell within the same custodial platform starting in 2026, reporting gets cleaner. If you move coins around, use multiple platforms, or transfer in assets, expect gaps. - Wallet-by-Wallet Tracking Is the Direction of Travel
The IRS has made clear the system is moving toward account-level and wallet-level tracking. They issued Rev. Proc. 2024-28 to help taxpayers transition their pre-2025 basis into a wallet or account structure. - The DeFi Reporting Rule Was Wiped Out, but Crypto Taxes Were Not
Congress used the Congressional Review Act to nullify the DeFi broker reporting rule (signed April 10, 2025). That framework is not coming online as written, but taxable events still exist, and the IRS still expects reporting when you have gains.
Bottom Line
Form 1099-DA makes crypto tax reporting more like traditional investing, with the IRS getting better third-party data over time.
For taxpayers, the biggest changes are simple:
- 2025: Expect proceeds reporting and do your own basis work.
- 2026 and Later: Basis reporting improves for covered assets, but transfers and multi-platform activity still require clean records.
If you are active across multiple exchanges or wallets, this is the year to tighten your tracking and documentation. The IRS is building a receipt-matching world, and humans historically do poorly when audited by math.