For the first time, your crypto exchange is sending the IRS a form with your name on it — and starting with 2026 transactions, that form will include your cost basis, not just your proceeds. Form 1099-DA, the IRS's new digital asset reporting form, has already started arriving for 2025 activity. But the rollout has been anything but smooth: Congress repealed a major piece of it in 2025, the IRS has delayed reporting on entire categories of DeFi transactions, and the phase-in spans three different tax years. Here's what's actually locked in for 2026, and what still isn't.
Disclaimer:
This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax professional for your specific tax situation.
Key Takeaways
- Gross proceeds reporting started with transactions on or after January 1, 2025, meaning the first batch of Forms 1099-DA reflecting 2025 sales landed with taxpayers and the IRS in early 2026.
- Cost basis reporting is the next phase, starting with digital assets acquired on or after January 1, 2026 — meaning you won't see basis on your 1099-DA until the form covering 2026 activity, filed in 2027.
- Congress repealed the rule that would have applied 1099-DA reporting to non-custodial DeFi protocols, using a rarely-invoked procedural tool (the Congressional Review Act) in April 2025 — so decentralized, non-custodial platforms are currently outside this reporting regime, and by law, can't be brought back in through similar regulation without new legislation from Congress.
- "Broker" is defined broadly but still means someone who takes custody or is "in a position to know" who's on the other side of a trade — centralized exchanges, hosted wallet providers, and kiosks are in; wallets and DeFi protocols that never touch your keys are currently out.
- The IRS is giving good-faith transition relief for 2025 transactions, meaning brokers won't be penalized for honest reporting mistakes during the form's first year — but that relief protects brokers, not you, from getting your own reporting wrong.
The rule: what Form 1099-DA actually requires and when
Form 1099-DA — "Digital Asset Proceeds From Broker Transactions" — comes out of final regulations the IRS issued in 2024 under its broader digital asset reporting authority. The IRS's own summary of the final regulations and the 2026 Form 1099-DA instructions lay out a phase-in across two main stages:- Phase 1 — gross proceeds only: For digital asset sale or exchange transactions occurring on or after January 1, 2025, brokers must report gross proceeds. These are the forms that started showing up in taxpayers' hands and at the IRS in early 2026, covering 2025 activity.
- Phase 2 — cost basis added: For "covered" digital assets — generally those acquired on or after January 1, 2026, and held in custody at a broker continuously since acquisition — brokers must also report cost basis and acquisition date. Those figures won't appear until the forms covering 2026 transactions, which get filed and furnished in early 2027.
Why it matters: a worked example
Say you sold digital assets across three transactions in 2025: 2.14 BTC sold for $187,530 in gross proceeds, 41 SOL sold for $6,847, and a small NFT sale for $2,200. (Illustrative only — figures constructed for this example, not drawn from any real filing.) Your Form 1099-DA for 2025, arriving in early 2026, would show total gross proceeds of roughly $196,577 — but the cost basis boxes would likely be blank or incomplete, because basis reporting doesn't kick in until 2026-acquired assets. That means you (or your preparer) still have to independently reconstruct what you originally paid for that 2.14 BTC and 41 SOL to calculate your actual gain or loss on Form 8949 — the 1099-DA alone won't get you there for 2025 sales, and the mechanics of reporting crypto gains on your tax return haven't fundamentally changed just because a new form exists. Contrast that with a sale in, say, March 2027 of an asset you bought in February 2026: that transaction should have both proceeds and basis reported by the broker, assuming it stayed in custody the whole time. The gap between "proceeds reported" and "basis reported" is exactly where reconciliation errors happen — the IRS gets a proceeds number that looks like it might be all gain, and it's on you to prove otherwise.How it works in practice: who's a "broker," who isn't
The final regulations define a digital asset broker as someone who takes possession of the assets being sold and is "in a position to know" the identity of the parties to the transaction. In practice, per the 1099-DA instructions, that captures:- Custodial exchanges (Coinbase, Kraken, and similar platforms)
- Certain hosted/custodial wallet providers
- Digital asset kiosks (crypto ATMs)
- Certain payment processors handling digital asset payments
The catch
A blank cost-basis box on your 1099-DA doesn't mean zero basis. If a broker doesn't yet have to report basis, it's still your job to report the correct number on Form 8949. Some taxpayers may be tempted to under-report basis (inflating gain) or over-report it (understating gain) simply because the form doesn't force the issue yet — both are wrong and both are your risk, not the broker's. Moving assets between wallets and exchanges can blow up your basis tracking. If you transfer crypto into a new custodial account, that broker often has no way of knowing your original purchase price and may report it as unknown or missing, especially during the transition years. The wallet-by-wallet safe harbor (Rev. Proc. 2024-28) was a one-time, irrevocable choice. It let taxpayers reasonably allocate unused basis across wallets for units held as of January 1, 2025, but the window and mechanics were specific — if you didn't act on it in time, you may be stuck with a default allocation method you didn't choose. DeFi's reporting gap is not a tax-liability gap. Just because your DEX trades or liquidity pool activity won't generate a 1099-DA doesn't mean that income or those gains are non-taxable — it means there's no third-party form catching your mistakes, which raises the stakes on your own recordkeeping. This is a genuinely unsettled, fast-moving area. Congress has already reversed one major piece of this framework once; further legislative or regulatory changes before the 2026 and 2027 filing seasons are plausible.Strategy: what to actually do
- Reconcile your own basis records against every 1099-DA you receive — don't assume the form is complete, especially for 2025-and-2026 transactions where basis reporting is still phasing in.
- Keep records of acquisition date and cost for every unit, independent of what any exchange reports, particularly for assets you've moved between wallets or platforms.
- If you took the Rev. Proc. 2024-28 wallet-by-wallet safe harbor, keep documentation of that election — it's irrevocable, and you'll want a clear paper trail showing how you applied it.
- Don't treat DeFi's current reporting exclusion as a tax exclusion. Track your DeFi activity with the same discipline as your exchange activity, since the underlying tax obligation hasn't changed even though the reporting infrastructure hasn't caught up.
- Watch for further legislative or IRS action. Given the CRA repeal and the ongoing Notice 2024-57 relief, this framework is still being actively shaped — what's true for the 2026 filing season may shift again before 2027.
Where Harness fits in
Reconciling a brand-new IRS form against your own records, across multiple exchanges and wallets, in the middle of a multi-year phase-in, is not a "check the box and move on" task. Harness connects you with crypto tax and accounting specialists who are already tracking how 1099-DA reporting is rolling out, so your return doesn't rely on guessing which boxes the form left blank. And since the form's wash-sale box (Box 1i) only covers tokenized securities, it's worth understanding on your own terms how the crypto wash sale rule currently works for everything else in your portfolio.
Putting it all together
Before you rely on your 1099-DA to file, confirm:- You know which phase applies to each transaction — gross-proceeds-only reporting for 2025 activity, versus proceeds-and-basis reporting for covered 2026-acquired assets.
- You've independently verified cost basis for anything the form doesn't fully report, rather than assuming a blank box means no gain.
- Your DeFi activity is tracked with the same rigor as your exchange activity, even though it currently generates no 1099-DA at all.
Frequently Asked Questions
Do I need to do anything differently because I received a Form 1099-DA? You still calculate and report your gains and losses on Form 8949 and Schedule D as before; the form is a new information return the IRS also receives, so discrepancies between your return and the 1099-DA are more likely to draw a notice. Does 1099-DA reporting apply to my DeFi wallet or decentralized exchange activity? Not currently. Congress repealed the rule that would have applied broker reporting to non-custodial DeFi platforms in April 2025, and by law it can't be reissued in similar form without new legislation. Your DeFi activity is still taxable; it's just not being reported to the IRS by a third party right now. What counts as a "broker" for 1099-DA purposes? Generally, anyone who takes custody of your digital assets during a sale and is in a position to know who's on the other side of the trade — centralized exchanges, hosted wallet providers, kiosks, and certain payment processors. Non-custodial wallets and decentralized protocols are currently excluded. When will cost basis actually show up on my 1099-DA? Not for 2025 transactions. Cost basis reporting phases in for covered digital assets acquired on or after January 1, 2026, so you'd first see it on forms covering 2026 activity, issued in early 2027. I already used the wallet-by-wallet safe harbor from Rev. Proc. 2024-28 — does anything change now? That election, if you made it for units held as of January 1, 2025, was a one-time, irrevocable allocation method. It doesn't need to be redone, but you should keep the documentation supporting it in case your basis is ever questioned. Will real estate purchases with crypto trigger 1099-DA reporting? Real estate professionals treated as brokers must report the fair market value of digital assets used in closings on or after January 1, 2026 — so yes, in that specific and fairly narrow scenario. Could the DeFi reporting exclusion change again? It's possible in theory, but the Congressional Review Act repeal specifically bars a "substantially similar" rule from being reissued without new legislation from Congress — so any change would likely require an act of Congress rather than a new Treasury regulation.
Disclaimer:
This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax professional for your specific tax situation.
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