What Is Form 1099-DA for Digital Assets?

Form 1099-DA, “Digital Asset Proceeds From Broker Transactions,” is a new information reporting document from the Internal Revenue Service (IRS). It was developed as a component of the Infrastructure Investment and Jobs Act. Its creation is designed to standardize how transactions involving cryptocurrencies and other digital assets are reported to both taxpayers and the IRS, mirroring the reporting systems already in place for traditional financial instruments like stocks and bonds.

This form is set to be implemented for transactions occurring on or after January 1, 2025, meaning the first forms will be sent to taxpayers and filed with the IRS in early 2026. The introduction of Form 1099-DA is part of a broader effort by the IRS to increase transparency within the digital asset economy. By mandating this reporting, the government seeks to ensure that gains from digital asset sales are reported accurately, addressing what has been a significant area of underreporting and taxpayer confusion.

Who Issues and Receives Form 1099-DA

The responsibility for issuing Form 1099-DA falls on entities defined as “brokers” under newly expanded regulations. This definition is broad and includes a wide range of platforms that facilitate digital asset transactions. Any person or organization that plays an active role in enabling these transactions for customers and has the ability to know the identity of the parties involved is considered a broker.

This expanded definition means that centralized cryptocurrency exchanges, such as Coinbase or Kraken, are required to issue the form. The rules also extend to digital asset payment processors, certain hosted wallet providers, and potentially even some crypto ATMs. The key factor is whether the entity is in a position to know the identity of the customers conducting transactions.

Taxpayers who will receive a Form 1099-DA are the customers of these brokers who have engaged in specific types of transactions. Anyone who has sold, exchanged, or otherwise disposed of a digital asset through one of these platforms will likely receive the form. This includes selling crypto for cash, trading one type of cryptocurrency for another, or using digital assets to pay for goods and services.

Individuals who use multiple exchanges or platforms could receive several Form 1099-DA documents in a single tax year, one from each broker they used. Conversely, a person who only holds digital assets in a self-custody wallet and does not transact through a broker may not receive a Form 1099-DA. In such cases, the responsibility for tracking and reporting all transaction details for tax purposes remains entirely with the taxpayer.

Information Reported on Form 1099-DA

Form 1099-DA is designed to provide a detailed summary of a taxpayer’s digital asset transactions from a specific broker for the tax year. The form will contain the taxpayer’s personal information, such as their name, address, and Taxpayer Identification Number (TIN), for identification purposes.

The gross proceeds from sales will be reported in Box 1f. This figure represents the total amount of money or value received from the sale of the digital assets, not the net profit. The form will also detail the specific digital asset sold, identified by a unique nine-digit alphanumeric code in Box 1a and its name in Box 1b. The number of units sold is also included, with the form allowing for up to 18 decimal places to accommodate the fractional nature of many digital assets.

The form provides date information for calculating capital gains or losses. The date the asset was acquired will be reported, as will the date it was sold in Box 1e. These dates allow both the taxpayer and the IRS to determine the holding period for each transaction.

The form also reports the cost basis in Box 1g, which is the original purchase price of the asset, including any fees. However, brokers may not always have this information, especially for assets transferred from an external wallet, so this box may be left blank. The form includes Box 9 to indicate if the asset is a “noncovered security,” meaning the broker is not responsible for reporting the basis to the IRS.

Using Form 1099-DA for Tax Reporting

Upon receiving Form 1099-DA, a taxpayer must use the information to report their capital gains and losses to the IRS on Form 8949, “Sales and Other Dispositions of Capital Assets.” Each transaction reported on the 1099-DA must be individually listed on Form 8949. The taxpayer will transfer the details from the 1099-DA, including the digital asset’s name, the dates of acquisition and sale, the sales price, and the cost basis.

The dates provided on Form 1099-DA are used to correctly categorize each transaction on Form 8949. Transactions for assets held one year or less are reported on Part I of Form 8949 for short-term gains or losses. Transactions for assets held more than one year are reported on Part II for long-term gains or losses. This distinction is important because short-term and long-term capital gains are taxed at different rates.

A taxpayer must handle transactions where the cost basis is not reported on the Form 1099-DA. If Box 1g is empty, the taxpayer is responsible for determining the basis using their own records, which requires meticulous record-keeping of purchase dates and amounts. Without providing a cost basis, the IRS may assume a basis of zero, resulting in the entire proceeds being treated as a taxable gain.

After all transactions are listed on Form 8949, the summary totals for short-term and long-term gains and losses are transferred to Schedule D, “Capital Gains and Losses.” Schedule D is the form used to aggregate all capital gains and losses from various sources. The net gain or loss from Schedule D is then carried over to the taxpayer’s main tax return, Form 1040, to be included in their overall income calculation.