Got Your 1099-DA? Here's Why It's Probably Wrong

If you traded crypto on a US exchange in 2025, you've probably received — or are about to receive — a shiny new IRS form you've never seen before: Form 1099-DA.

It's the first-ever tax form designed specifically for digital assets. And for most people, the numbers on it are going to look terrifying.

Here's why you shouldn't panic — and what you actually need to do.

What is Form 1099-DA?

Form 1099-DA (Digital Asset Proceeds From Broker Transactions) is the IRS's new standardised reporting form for cryptocurrency. Starting with the 2025 tax year, every centralised exchange — Coinbase, Kraken, Crypto.com, Gemini, and others — is required to send one to both you and the IRS.

It reports every sale, trade, or exchange of digital assets you made on that platform during 2025.

The form was supposed to be sent by February 17, 2026, but many exchanges missed that deadline. Some won't have them ready until mid-March. If you haven't received yours yet, it's likely still coming.

The problem: proceeds without cost basis

Here's where it gets ugly.

For the 2025 tax year, exchanges are only required to report gross proceeds — the total amount you received from selling crypto. They are not required to report your cost basis (what you originally paid for it).

That means your 1099-DA might show $50,000 in proceeds from crypto sales. But if you bought that crypto for $45,000, your actual taxable gain is only $5,000. The form doesn't show that. It just shows the $50,000.

If you file without calculating your own cost basis, or if the IRS only sees the gross proceeds number, it looks like you owe tax on the full $50,000.

This isn't a bug. The IRS deliberately gave exchanges a grace period on cost basis reporting — it becomes mandatory starting with the 2026 tax year. But for 2025, the burden of proving what you paid for your crypto falls entirely on you.

Why your 1099-DA is probably inaccurate

Even beyond the missing cost basis, there are several reasons the numbers on your form might not match reality:

Transferred assets break the chain. If you bought Bitcoin on Coinbase and then moved it to Kraken to sell, Kraken has no idea what you originally paid. They'll mark the cost basis as "unknown" or "non-covered." The IRS could technically assign a cost basis of zero — meaning you'd owe tax on the entire sale amount.

DeFi isn't covered. Decentralised exchanges, lending protocols, and on-chain activity aren't reported on Form 1099-DA at all. The Senate voted to exclude decentralised platforms from broker reporting requirements. But you still need to report those transactions yourself.

Staking and mining income may be elsewhere. Some exchanges report staking rewards on a 1099-MISC rather than a 1099-DA. You might receive multiple forms from the same platform.

Timing mismatches. Most exchanges use Eastern Time for their reporting cutoff. If you made a trade at 11pm Pacific on December 31, that might show up as a January 1 transaction — which puts it in a different tax year.

What to do about it

Step 1: Don't file based solely on your 1099-DA. The form is a starting point, not the complete picture. You need to calculate your own cost basis for every transaction.

Step 2: Gather your records. Pull transaction histories and CSV exports from every exchange and wallet you used in 2025. Include transfers between platforms — these aren't taxable events themselves, but they affect cost basis tracking.

Step 3: Track your cost basis across platforms. This is the hard part. If you moved crypto between exchanges, you need to trace the cost basis from where you originally bought it through every transfer to where you ultimately sold it.

Step 4: Report on Form 8949 and Schedule D. Your 1099-DA data feeds into Form 8949, where you list each transaction with both proceeds and cost basis. The net gains and losses then flow to Schedule D on your Form 1040.

Step 5: Keep everything. The IRS can audit up to six years back for significant underreporting. Keep all transaction records, CSV exports, and cost basis calculations.

The IRS matching engine is real

The whole point of Form 1099-DA is to feed the IRS's Automated Underreporter system. This is the same system that cross-references your W-2 with your tax return. Now it will do the same with your crypto proceeds.

If what you report on your return doesn't match what appears on the 1099-DA sent to the IRS, you will likely receive a CP2000 notice — a letter asking you to explain the discrepancy or pay additional tax.

The good news: the IRS knows that 2025 is a transitional year. They're aware cost basis data is incomplete. They're more likely to target people who completely omit crypto income than those who have minor discrepancies. But "the IRS probably won't notice" is not a tax strategy.

What about crypto I bought before 2025?

Most crypto bought before January 1, 2026 is classified as "non-covered" — meaning exchanges aren't required to report cost basis for it. This includes virtually everything you bought in 2025 or earlier.

Starting with assets acquired on or after January 1, 2026, exchanges will begin reporting cost basis for "covered" securities — but only for assets that were purchased AND sold on the same exchange without ever being transferred. The moment you move crypto off-exchange, the broker's basis visibility is broken.

In practice, this means the cost basis gap isn't going away anytime soon.

Where HandyTax fits in

This is exactly the kind of problem we solve every day.

We reconcile your complete transaction history across all exchanges and wallets, calculate accurate cost basis using the appropriate method for your situation (FIFO, LIFO, HIFO, or Specific Identification), and produce tax-ready reports that you or your accountant can use to file.

For 2025 specifically, we cross-reference your 1099-DA forms against your actual transaction data to catch discrepancies before the IRS does. If your exchange shows $50,000 in proceeds and zero cost basis, we reconstruct the full picture so you only pay tax on your actual gains.

We've handled portfolios with 200,000+ transactions across dozens of exchanges. A few 1099-DA forms with missing data is a Tuesday for us.

The April 15 deadline is approaching. If you're staring at a 1099-DA that looks wrong — it probably is. Get a quote →