For years, crypto investors operated in a reporting gray area. That is changing. Beginning with transactions made in 2025, custodial crypto platforms are required to report digital asset sales and exchanges to the IRS using a new form: Form 1099-DA. While the first forms will not be issued until early 2026, the impact of these rules begins now. Understanding what will be reported, which platforms are covered, and how cost basis is calculated can help you avoid mismatches, audits, and unnecessary tax exposure.
Starting in 2025, custodial crypto platforms must report digital asset transactions to the IRS on new Form 1099-DA. Investors should understand which transactions are reported, how cost basis is tracked, and what steps to take now to avoid reporting errors in 2026.
1. What Is Form 1099-DA
Form 1099-DA is a new IRS reporting form designed specifically for digital assets. It will report sales and exchanges of cryptocurrency and other digital assets that occur through custodial platforms.
The first Form 1099-DA filings will cover 2025 transactions and must be issued by brokers in early 2026.
Initially, the form will report gross proceeds from crypto transactions. Beginning with the 2026 tax year, custodial brokers will also be required to report cost basis, making it easier for the IRS to identify underreported gains.
2. Which Crypto Platforms Are Required to Report
The new reporting rules apply only to custodial brokers, meaning platforms that take possession of your digital assets.
These include:
• centralized crypto exchanges
• hosted or custodial wallet providers
• crypto payment processors that take custody of assets
• digital asset kiosks
• certain real estate transactions involving crypto beginning in 2026
Non-custodial wallets, decentralized exchanges, and most DeFi platforms are not subject to these reporting rules. Recent regulations that attempted to expand reporting to DeFi were formally rescinded in 2025.
3. Which Digital Assets and Transactions Are Covered
The reporting rules apply broadly to digital assets, including:
• cryptocurrencies such as Bitcoin and Ethereum
• stablecoins once annual sales exceed $10,000
• NFTs when gross proceeds reach $600 or more
Transactions subject to reporting include sales or exchanges for:
• cash
• goods or services
• other digital assets
• stored-value cards
• broker services
• securities
• real estate (starting in 2026)
Routine retail transactions processed through custodial payment platforms may also be reported once annual thresholds are met.
4. What Information Brokers Will Report
For each reportable transaction, custodial brokers must provide the IRS with:
• your name and taxpayer identification number
• the digital asset sold
• quantity transferred
• transaction date
• gross proceeds received
• whether the exchange was for cash, property, or services
For 2025 transactions, brokers report gross proceeds only. Cost basis reporting begins in 2026.
This means that in 2025, you remain responsible for accurately tracking and reporting your own basis.
5. Cost Basis and Accounting Methods Are Changing
Crypto basis reporting follows similar principles to stock reporting but with new constraints.
The default accounting method is FIFO (first in, first out). Under FIFO, the earliest acquired units are treated as sold first, which often produces higher taxable gains in rising markets.
To avoid FIFO, investors may use specific identification, but the rules are stricter than in prior years. For 2025 only, transitional relief allows investors to document specific identification in their own records if the broker cannot process those instructions.
Beginning in 2026, brokers must be able to accept and process specific identification instructions directly. If no valid identification is made, FIFO will apply automatically.
6. The End of the “Single Wallet” Approach
Historically, many crypto investors treated all holdings as if they were in one universal wallet for basis tracking. That approach is no longer permitted.
Under the new rules, basis must be tracked wallet by wallet and exchange by exchange. If you held crypto across multiple platforms as of January 1, 2025, you must allocate your existing cost basis to each wallet using a reasonable method. The IRS provided safe harbor methods, and the deadline to complete this allocation was extended to December 31, 2025.
This change makes accurate recordkeeping far more important.
7. What Crypto Investors Should Do Now
Before year-end, consider taking these steps:
• identify which platforms you use that are custodial
• confirm where your crypto is held and transferred
• organize cost basis records by wallet and exchange
• decide whether FIFO or specific identification produces a better result
• document your chosen method clearly
• consider using crypto tax software that supports wallet-level tracking
Waiting until Forms 1099-DA arrive may be too late to fix errors.
Year-End Crypto Compliance Checklist
☑ Identify custodial vs non-custodial platforms
☑ Track crypto holdings by wallet and exchange
☑ Allocate unused cost basis before December 31
☑ Choose an accounting method intentionally
☑ Save transaction records and confirmations
☑ Prepare for Form 1099-DA reconciliation in 2026
Crypto reporting rules are becoming more complex. Brothers Tax can help you review your holdings, align your records with the new requirements, and prepare for Form 1099-DA reporting. Contact us at taxbrothers.tax/contact.