Guide to the 1099 DA: Digital Asset Reporting in 2025

The IRS finalized the new Form 1099-DA in January 2025, which presents reporting challenges for cryptocurrency and other digital assets. This comprehensive guide explains what this new 1099-DA means for investors, tax pros and estate planners in 2025 and what you can do to avoid tax surprises and stay in compliance.

Finally, Formal Digital Asset Reporting: The 1099-DA

1099-DA brings digital asset reporting into a framework familiar to anyone who has dealt with traditional securities reporting via 1099-B. It requires brokers to report proceeds from digital asset sales to increase transparency and compliance in the digital asset space.

IRS Commissioner Danny Werfel said, “This new form will provide more clarity for taxpayers and give them another tool to help them accurately report their digital assets.” Werfel emphasized the dual purpose: to prevent digital assets from being used to hide taxable income and to give compliant taxpayers the information they need to report accurately.

This didn’t happen overnight. It’s been years in the making, starting with the Infrastructure Investment and Jobs Act (IIJA) in late 2021, proposed regulations in August 2023 and several drafts before the final form and instructions for 2025. 1099-DA is a major effort by the IRS and Treasury to bring digital assets into the existing tax framework.

Who Needs to File 1099-DA? Who is a “Broker”?

The obligation to file 1099-DA falls on “brokers”. The definition in I.R.C. §6045, expanded by the IIJA, is broad. It includes any person who, for consideration, is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.

This definition goes beyond traditional centralized cryptocurrency exchanges. It can include:

• Platforms that regularly redeem digital assets they issued.
• Entities acting as agents, dealers or “digital asset middlemen”.
• Payment processors that facilitate payments using digital assets.
• Operators of digital asset kiosks.
• Real estate reporting persons who know digital assets were used in a transaction. Not everyone who touches crypto is a broker. Those only engaged in proof-of-work or proof-of-stake validation or those who just provide hardware or software for users to control private keys are not a broker unless they perform other brokerage functions.

The requirement applies to U.S. digital asset brokers. This means U.S. persons or specific U.S. branches effecting sales for others.

What is reported on the 1099 DA?

1099-DA collects detailed information about digital asset transactions. Let’s break down the key boxes and the data brokers will report:

Identifying Information

Standard information about the filer (broker) and the recipient (customer), including names, addresses and Taxpayer Identification Numbers (TINs), are required. An account number assigned by the broker may also be included.

Asset Details (Boxes 1a, 1b, CUSIP)

• Box 1a (Code for Digital Asset): Brokers should enter the nine-character alphanumeric Digital Token Identification Foundation (DTIF) code if available. If not, “999999999” is used.
• Box 1b (Name of Digital Asset): The full name of the digital asset involved.
• CUSIP Number: This box applies mainly if the digital asset is also a security (like a tokenized security) with a CUSIP number.

Transaction Details (Boxes 1c, 1d, 1e, 1f)

• Box 1c (Number of Units): Reports the quantity of the digital asset sold, up to 18 decimal places.
• Box 1d (Date Acquired): The date the asset was originally acquired (MM/DD/YYYY). This is important for determining holding periods (short-term vs. long-term gains/losses) but has specific reporting rules for 2025 vs 2026.
• Box 1e (Date Sold): The date the sale or disposition occurred (MM/DD/YYYY).
• Box 1f (Proceeds): This shows the gross proceeds from the sale. Proceeds can include cash, the fair market value of other digital assets received, or the value of property or services received. Brokers must reduce proceeds by transaction costs like fees and commissions related to the sale.

Basis Reporting (Boxes 1g, 1h, 1i, 2)

This is the most complex area and subject to phased implementation:* Box 1g (Cost or Other Basis): Reports the taxpayer’s cost basis in the asset sold. This is important for calculating capital gains or losses. Brokers may rely on customer-provided information in some cases (indicated in Box 8).

• Box 1h (Accrued Market Discount): Applicable if the digital asset is also a debt instrument.
• Box 1i (Wash Sale Loss Disallowed): Reports losses disallowed under wash sale rules (Section 1091), mainly relevant for digital assets treated as securities (like tokenized securities) where the same asset is repurchased shortly after being sold at a loss.
• Box 2 (Check if Basis Reported to IRS): Indicates whether the basis information in Box 1g is being reported to the IRS.

Other Important Boxes

• Box 4 (Federal Income Tax Withheld): Reports any backup withholding.
• Box 6 (Gain or Loss): Indicates whether the transaction resulted in a short-term or long-term gain or loss, and potentially if it’s ordinary income/loss (e.g., for transactions involving foreign currency).
• Box 7 (Check if Only Cash Proceeds): Marked if the transaction involved only cash proceeds (USD or convertible foreign currency).
• Box 9 (Check if Noncovered Security): A checkbox distinguishing between assets where basis reporting is mandatory (covered) versus optional (noncovered) starting in 2026.
• Boxes 11a-c (Optional Reporting Method): Used for aggregate reporting allowed for qualifying stablecoins or specified NFTs under specific conditions.
• Boxes 12a-b (Transfer-in Details): Reports units and dates for assets transferred into the broker’s custody.

Ever tried to trace the cost basis of coins bought across three exchanges, two wallets and a peer-to-peer swap? If your wallet history looks like tumbleweed blowing through a ghost town, you’re not alone.

Reporting Timelines: 2025 vs 2026 and Beyond

The IRS implemented a phased approach to basis reporting, recognizing the challenges brokers face in obtaining historical acquisition data.* For Sales in 2025: Brokers must report gross proceeds (Box 1f) and related transaction details (Boxes 1a, 1b, 1c, 1e). Reporting cost basis (Box 1g) and related details (Boxes 1d, 1h, 1i, 2, 6) is optional. The IRS provides penalty relief (Notice 2024-56) for brokers who voluntarily report basis information in 2025, even if inaccuracies exist.

• For Sales on or after January 1, 2026: Brokers must report both gross proceeds and cost basis information for covered securities.

A covered security is generally a digital asset acquired after 2025 in an account where the broker provides custodial services and held there until sale.

A noncovered security includes:

• Assets acquired before January 1, 2026.
• Assets transferred into a custodial broker account.
• Assets acquired where the broker did not provide custodial services.
• Assets acquired by exempt recipients or certain foreign persons.

Starting in 2026, if a broker sells a noncovered security, they can check Box 9. If Box 9 is checked, reporting basis information (Boxes 1d, 1g, 1h, 1i, 6) is optional. If they voluntarily report basis for a noncovered security and check Box 9, they receive penalty relief for inaccuracies. If they report basis for a noncovered security but do not check Box 9, they are subject to penalties for incorrect reporting.

This is important. For assets acquired before 2026 or transferred between brokers or wallets, the burden of tracking and reporting accurate cost basis will often remain on the taxpayer, even after 2026. Many exchanges will issue 1099-DAs for noncovered securities with Box 1g (Basis) left blank or Box 9 checked, requiring taxpayers to supplement the form with their own records.

Basis Tracking Post Safe-Harbor

The “wild west” nature of digital assets means many long-term holders have no records. Tracking basis coin-by-coin or token-by-token across different wallets, exchanges (some now defunct), peer-to-peer transactions, forks and airdrops can be impossible. The default IRS method requires specific identification of units sold; if that’s not possible, a first-in, first-out (FIFO) approach is generally applied which may not be optimal from a tax perspective.

The IRS recognized this difficulty and offered a temporary solution in Rev. Proc. 2024-28: the Global Allocation Safe Harbor. This allowed taxpayers to opt for an average basis method for digital assets acquired before January 1, 2025 before the end of 2024.

Instead of tracking the basis of each specific unit, taxpayers could calculate an average cost basis for each type of digital asset (e.g. all Bitcoin averaged together, all Ether averaged together) held across all their wallets and accounts as of the allocation date. This average basis is then used for reporting future sales of those pre-2025 assets.

Taxpayers who did not make the election before January 1, 2025, must now rely on other tracking methods such as FIFO or specific identification for cost basis reporting.

Special Cases and Considerations

The 1099-DA instructions also cover specific scenarios:

• Qualifying Stablecoins: Brokers can use an optional method to report aggregate sales of qualifying stablecoins (those pegged 1:1 to a fiat currency with specific mechanisms) on a single 1099-DA per stablecoin type, simplifying reporting for frequent stablecoin transactions.
• Specified NFTs: A similar optional aggregate reporting method exists for specified NFTs (unique, indivisible tokens not representing excluded property). A separate box (11c) is used for proceeds from the first sale by a creator/minter under this method.
• Dual Classification Assets: Assets that are both digital assets and traditional securities (like tokenized stock) are generally reported on Form 1099-DA. Exceptions exist: Section 1256 contracts (like futures) go on Form 1099-B, assets traded on certain limited-access networks may stay on 1099-B, and shares in money market funds are exempt. For tokenized securities reported on 1099-DA, CUSIP numbers and wash sale rules (Box 1i) apply.
• Exempt Transactions: Rewards/staking income, certain wrapping/unwrapping transactions, digital asset lending/short sales, and notional principal contracts are currently carved out from 1099-DA reporting per Notice 2024-57 though income derived might be reportable elsewhere.
• Estate Planning: For estate planning attorneys and fiduciaries, basis tracking is a bit more complex. 1099-DA provides a starting point but understanding if basis is reported (Box 2), if it’s for noncovered securities (Box 9) or if a global allocation was made is essential for calculating estate taxes, step-up in basis and advising beneficiaries.

Preparing for the New Era of Digital Asset Reporting

1099-DA marks a new chapter in digital asset taxation. Brokers have a big implementation task, and taxpayers need to be ready to provide the information or reconcile the forms they receive with their own records especially for basis. Taxpayers who documented and elected the global allocation safe harbor by the end of 2024 can now use the average basis method for assets acquired before 2025. Others must use FIFO or another acceptable method going forward.

Disclaimer: This is for educational purposes only and not tax or legal advice. Consult with a qualified professional.  IRS CIRCULAR 230 NOTICE. To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax analysis contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.