What is Form 1099-DA?

Form 1099-DA (Digital Asset Proceeds From Broker Transactions) is the new IRS form that custodial crypto brokers like Coinbase must use to report your digital asset sales starting with tax year 2025. It reports gross proceeds for 2025, and will add cost basis reporting beginning in 2026.

What is the default accounting method for crypto?

FIFO (first in, first out) is the default. The first crypto unit you purchased is treated as the first sold. In rising markets, this produces the largest taxable gains. You can use specific identification instead, but must instruct your broker before or at the time of sale.

Do DeFi transactions require Form 1099-DA reporting?

No. The DeFi reporting regulations were rescinded in July 2025 after Congress passed a joint resolution under the Congressional Review Act. For the foreseeable future, there are no IRS reporting requirements for decentralized finance transactions.

Form 1099-DA Is Here: What Crypto-Owning Contractors Need to Know for 2025

If you hold crypto — Bitcoin, Ethereum, stablecoins, NFTs — the IRS just turned on the lights. Starting with tax year 2025, custodial crypto brokers must report your transactions on the new Form 1099-DA. And starting in 2026, they'll also report your cost basis.

For contractors who've been buying crypto on the side, this changes the compliance landscape dramatically. The days of "the IRS doesn't know about my crypto" are over.

What Gets Reported in 2025

Custodial brokers — Coinbase, Bybit, Binance, hosted wallet providers, crypto kiosks, and payment processors like BitPay — must report gross proceeds from digital asset sales effected on or after January 1, 2025. That's the total amount you received from a sale or exchange before accounting for costs or fees.

The first batch of Form 1099-DAs must be filed with the IRS by March 31, 2026 (or March 2 if filed on paper). You'll also receive a copy.

For 2025, brokers report gross proceeds only — not your cost basis. That means you're still responsible for calculating your own gains and losses. Starting January 1, 2026, brokers must also report cost basis, which makes the IRS's job of matching your return to reported transactions much simpler.

The Accounting Method Matters

When you buy the same crypto at different times and prices, you create multiple cost basis lots. Which lot gets "used" when you sell determines your gain or loss.

The default method is FIFO — first in, first out. In a rising market, FIFO produces the largest gains because your oldest (cheapest) units are sold first. In a falling market, it's the opposite.

The alternative is specific identification: you designate exactly which units you're selling. This lets you pick your highest-cost units first (HIFO) to minimize gains, or your lowest for strategic loss harvesting. But the new rules require you to make this identification at or before the time of sale — either by instructing your broker directly or by setting up a standing order.

For 2025 only, if your broker can't process specific identification instructions, you can do it in your own records without informing the broker. This transitional relief ends January 1, 2026.

The Wallet-by-Wallet Rule

If you hold crypto across multiple exchanges or wallets, you can no longer treat them as one pool for basis calculations. The regulations mandate wallet-by-wallet basis tracking. Each account has its own basis calculations.

If you had crypto in multiple wallets as of January 1, 2025, you needed to allocate your unused basis to specific accounts by December 31, 2025. The IRS provides two safe harbors: specific unit allocation (detailed but precise) or global allocation (simpler — spread basis evenly using a consistent rule).

What's Not Reported

Decentralized finance (DeFi) transactions are off the hook. The Biden administration's DeFi reporting regulations were rescinded in July 2025 after Congress killed them under the Congressional Review Act. The IRS can't issue substantially similar regulations without going through Congress again.

Also exempt for now: wrapping/unwrapping, liquidity provider transactions, staking, certain lending transactions, and short sales of digital assets.

What Contractors Should Do Now

Use crypto tracking software. CoinTracker, Koinly, or TaxBit can reconcile your wallets, calculate basis, and generate the reports you need for your return.
Set up specific identification. If your broker supports it, set a standing order (HIFO is usually optimal in rising markets). If not, document it yourself for 2025 under the transitional relief.
Complete your wallet allocation. If you missed the December 31, 2025 deadline, do it now and document your method.
Reconcile to your 1099-DA. When you receive Form 1099-DA, match it against your records. Discrepancies will trigger IRS attention.

The IRS now gets a copy of your crypto sales. If your tax return doesn't match, expect a notice. Get your basis records clean before you file.

The Bottom Line

Form 1099-DA brings crypto into the same reporting framework as stocks and securities. The IRS will know what you sold and for how much. Starting in 2026, they'll also know your basis. If you've been casual about crypto tax reporting, this is the year to get serious. The matching program is coming, and the penalties for underreporting are real.