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A critical update for crypto investors and businesses
As digital assets continue to grow in popularity, the IRS is introducing new reporting requirements designed to bring cryptocurrency into the traditional tax system. Starting in 2025, brokers and exchanges that handle crypto transactions will be required to issue a brand-new form: Form 1099-DA (Digital Asset Proceeds From Broker Transactions).
In this article we will explain what Form 1099-DA is, who it impacts, and what steps investors, exchanges, and businesses should take now to prepare. Our goal is to help you stay compliant and avoid costly surprises once reporting begins.
What Is Form 1099-DA?
Form 1099-DA is a new IRS form that reports the sale or exchange of digital assets, like how Form 1099-B reports stock transactions.
Starting January 1, 2025, crypto exchanges and brokers must record and report digital asset transactions to both the taxpayer and the IRS. Investors will begin receiving their first 1099-DA forms in early 2026, covering transactions completed in 2025.
This is part of the IRS’s broader effort to close the “crypto tax gap” ensuring all taxable digital asset transactions are properly reported and taxed.
Why the Change?
Until now, crypto tax reporting has been inconsistent. Some exchanges issued 1099-Ks, some provided only internal reports, and others offered nothing at all. The new regulations aim to:
- Create consistent reporting standards across all brokers and exchanges.
- Ensure the IRS receives third-party verification of crypto activity.
- Make it easier for taxpayers to accurately report gains and losses.
The IRS wants crypto reporting to look just like traditional investment reporting meaning its clear, traceable, and verifiable.
What Will Be Reported
|
Tax Year |
Broker Reporting Requirements |
Key Details |
|
2025 |
Brokers must report gross proceeds from each sale or exchange |
The IRS will receive transaction totals but your original cost basis may not be accurate if assets acquired in other exchanges or wallets. |
|
2026 and later |
Brokers must also report cost basis, acquisition date, and gain or loss |
Investors will see complete transaction information on their 1099-DA. You should still check your cost basis as it may not be accurate if assets acquired in other exchanges or wallets. |
The new rules apply to crypto brokers, centralized exchanges, and custodial wallets — essentially, any platform that facilitates digital asset transactions on behalf of users.
Noncustodial and decentralized platforms (DeFi) are not yet required to report, but future guidance is expected to expand coverage.
Why This Matters for Investors and Businesses
Form 1099-DA will significantly change how crypto activity is reported and audited. Here’s what that means for you and your clients:
- Greater transparency: The IRS will now have the same data you do.
- Higher audit risk: Mismatches between your return and broker data could trigger IRS notices.
- Recordkeeping is critical: Investors must track acquisition costs for any crypto purchased before 2025. Make sure to reconcile all wallets, even if not active but used to acquire current crypto.
These changes represent a major shift toward full crypto transparency — and they’re coming quickly.
Steps to Prepare for 2025
To stay compliant and minimize future headaches, take these steps before the new reporting begins:
- Organize your records. Gather transaction histories, wallet logs, and cost basis information for all your digital assets. Using a Crypto reconciliation tool is critical, at CFO Associates we use Koinly to help our clients reconcile their activity.
- Review your exchange’s policies. Confirm how your platform plans to handle the new IRS requirements. Review your 1099-DA cost basis to see if it is accurate.
- Consult your tax advisor. Professional guidance can help you interpret the rules correctly and plan for the new reporting structure.
For both Web3 business owners and individual crypto investors alike, preparing now will make next year’s transition much smoother.
The Bottom Line
The introduction of Form 1099-DA marks a turning point in how the IRS monitors crypto activity. By 2025, digital asset transactions will be reported with the same rigor as traditional investments.
At CFO Associates, we help businesses, investors, and exchanges stay ahead of evolving tax regulations. Our team can review your crypto activity, ensure your records are compliant, and help you prepare for the new 1099-DA reporting rules. Including assisting clients with any crypto audit notices.
If you trade or hold digital assets, now is the time to act; not when tax season arrives. Schedule a call with us to discuss how these new rules may affect you and what steps you can take to prepare.
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