The 1099-DA Is Here. Here's What It Gets Right, What It Gets Wrong, and What You Need to Do About It.

This form was always going to be messy

Crypto has always had a tax compliance problem, not because the rules are unclear, but because the infrastructure to enforce them didn't exist. For over a decade, U.S.-based exchanges reported nothing to the IRS. No standardized form, no paper trail. Traders were on the honor system, and the IRS knew it.

The 1099-DA changes that. Starting with the 2025 tax year, every U.S. crypto exchange must file a 1099-DA with the IRS for every customer who made a sale, with no minimum threshold. If you traded on three platforms, the IRS is receiving three separate filings. The era of unreported crypto transactions is functionally over.

But here's the thing: the form that's supposed to bring order to crypto tax reporting is, in its first year, only half-built. Understanding exactly what's missing and why is the difference between filing correctly and creating a problem you'll spend years untangling.

What the form actually reports in 2025

The 1099-DA is the digital asset equivalent of the 1099-B you receive from your brokerage for stock sales. Like the 1099-B, it reports proceeds (what you sold your crypto for) and sends that figure to both you and the IRS.

For 2025, that's essentially all it does. The IRS will not receive cost basis information from any broker for the 2025 tax year, full stop. The requirement to report cost basis only applies to covered assets: assets acquired on or after January 1, 2026 and held at the same broker through the date of sale. Anything acquired before that date, or that ever moved between platforms, is not a covered asset, and basis reporting is not required.

What you see on your copy of the form is a different matter. Some brokers are including cost basis on the substitute statement, the customer-facing version of the form, for assets that were acquired and held on their platform through disposition. If you bought and sold entirely within the same exchange without any transfers, you may see a basis figure on your copy. But that information was not transmitted to the IRS, and it won't appear for any asset that was ever transferred in from another wallet or platform, because the broker simply has no visibility into what you paid elsewhere.

This creates three distinct problems in practice. First, basis presentation is inconsistent across brokers: one exchange may include it on the substitute statement, another may not. Second, any asset that ever moved between platforms will show missing or unknown basis regardless. Third, and separate from the basis reporting issue entirely, even where basis figures do appear, they may not reflect the lots your tax software has been tracking, depending on the accounting method in use. That last problem is covered in more detail below.

That is not a mistake. It's where the regulations currently stand, but it is a problem if the gaps make it onto your tax return uncorrected.

The problem missing cost basis actually creates

Missing cost basis on your 1099-DA doesn't mean the IRS automatically taxes you on the full sale amount as if you paid nothing. The IRS receives the proceeds figure from your exchange. What they don't receive, and don't have, is your basis. They're not going to assume zero. What they will do is compare the proceeds on your 1099-DA against what you report on Form 8949, and if those numbers don't reconcile, you'll hear about it.

The real risk is what happens when a taxpayer treats the 1099-DA as a complete picture and files Form 8949 without independently sourcing correct cost basis. That's when a return ends up reflecting zero basis, because no one went back and reconstructed the actual numbers.

Say you accumulated $40,000 of bitcoin over three years and sold it in 2025 for $42,000. Your actual gain is $2,000. If that purchase history isn't reconciled before filing, you risk reporting a $42,000 gain. The difference isn't a rounding error; it's the result of incomplete records making it onto a return.

Your 1099-DA is a record the exchange sends to the IRS. It does not calculate what you owe. Your obligation to report correct cost basis on Form 8949 has always been yours, and the 1099-DA just makes the gap between what exchanges know and what you know more visible than it's ever been.

You can fix this, and the IRS says so explicitly

The IRS anticipated the incomplete-basis problem. Notice 2025-7 provides temporary relief for the 2025 tax year, explicitly permitting taxpayers to rely on their own books and records to identify which specific units are being sold and report the correct cost basis on Form 8949.

This isn't a workaround or a gray-area position. It's the intended mechanism. The IRS built the relief into the transition framework because they know the reporting infrastructure isn't fully operational yet.

What the relief doesn't do is build your records for you. If your cost basis documentation is incomplete, reconstructing it is the work that actually needs to happen before you file.

Why cost basis is harder to track than most people realize

The structural reason CoinTracker exists is that crypto cost basis doesn't behave like stock cost basis.

When you buy shares of a stock at a brokerage, the brokerage tracks your lot (purchase date, price, quantity) from acquisition to sale and reports it on your 1099-B. The system is closed. Everything stays in one place.

Crypto doesn't work that way. Assets move between exchanges, self-custody wallets, and blockchain protocols. A bitcoin purchased on Coinbase in 2021, transferred to a hardware wallet, bridged to a Layer 2, and sold on Kraken in 2025 has touched four environments, and none of them has a complete view of the lot's history. Each venue only sees the piece of the journey that happened on its platform.

That's the problem crypto tax software was built to solve: stitching together a fragmented transaction history into a single, accurate cost basis ledger. Not because it's a nice feature, but because without it, correct cost basis calculation is structurally impossible for anyone with meaningful activity across platforms.

The lot assignment mismatch you should expect

Even where exchanges do report cost basis, there's another issue that will surprise people: your 1099-DA and your tax software can show different gains, and both can be correct.

Exchanges generate the 1099-DA using FIFO (first-in, first-out) by default. If you're using HIFO (highest-in, first-out), LIFO, or Specific Identification in your own records, the two systems are tracking different lots.

Suppose you hold two bitcoin lots: Lot A acquired in 2019 at a $5,000 basis, Lot B in 2022 at a $40,000 basis. You sell one bitcoin in 2025. Under HIFO, your records consume Lot B. The exchange's 1099-DA, running FIFO, consumes Lot A. Your records now show Lot A remaining; the exchange implies Lot B remaining. Same transaction history, different surviving lots, and neither set of records is wrong.

Under Notice 2025-7, your software's lot assignments are valid if they're grounded in your books and records. If the numbers don't match your 1099-DA, the first question isn't "which one is right." It's "why do they differ." Usually the answer is accounting method, and the resolution is documenting your method and filing Form 8949 accordingly.

What the form includes and what falls outside it

The 1099-DA captures activity that took place on the exchange. That means:

Included: Direct sales (crypto to fiat), exchanges, and other dispositions executed on the platform.

Excluded: On-chain activity through decentralized exchanges, yield farming, liquidity pool transactions, wrapped token events, and transfers between your own wallets. Sales on non-U.S. exchanges (platforms like KuCoin or Bybit have no U.S. reporting obligation and will not file a 1099-DA).

The absence of a transaction on this form does not make it non-taxable. Every taxable disposition, centralized or decentralized, on-chain or off, still needs to be reported on Form 8949.

What complete compliance actually looks like

Getting from your 1099-DA to an accurate tax return requires a complete transaction history across every exchange, wallet, and chain you've touched; correct lot matching for every sale applied consistently under a single accounting method; proper treatment of DeFi activity and other events the 1099-DA doesn't capture; and a Form 8949 that reconciles against your 1099-DA proceeds while reflecting your actual cost basis.

How you get there depends on the complexity of your situation.

For straightforward activity (a limited number of trades on one or two exchanges, minimal transfers, no DeFi) CoinTracker connects directly to your exchanges and wallets, imports your full transaction history, reconstructs cost basis, and generates a Form 8949 you can hand directly to your CPA or import into filing software. You can also run your history under multiple accounting methods (FIFO, HIFO, LIFO, Specific Identification) and compare outcomes before making your election.

For complex situations (multi-exchange histories, significant DeFi activity, token events, platform bankruptcies, ICOs, or years of incomplete records) professional reconciliation is the right call. Count On Sheep specializes in exactly this work. Their team uses CoinTracker as the core reconciliation engine, layering in manual review by crypto tax professionals who can resolve what software can't catch on its own: transactions categorized incorrectly, cost basis that needs to be rebuilt from on-chain data, and complex events that require professional judgment to report correctly.

Count On Sheep's process produces an audit-ready package, a clean Form 8949 and full capital gain/loss reconciliation, that can be handed directly to a CPA for filing. If your history is complicated, the combination of CoinTracker's infrastructure and their team's expertise is the most reliable path to a return you can stand behind.

The bottom line

The 1099-DA marks a genuine turning point in how the IRS approaches crypto compliance. The form is real, brokers are filing it, and the era of no-documentation crypto reporting is over.

But the form is incomplete by design in its first year. Cost basis will be missing for most taxpayers, the form captures only exchange activity, and the lot assignments it implies may not match your own records. None of that is a reason to panic; it is a reason to make sure your transaction history is fully reconstructed before you file.

Notice 2025-7 gives you the authority to use your own records. CoinTracker gives you the infrastructure to build them. And for situations where the complexity requires professional eyes, Count On Sheep provides the expert reconciliation layer to make sure everything is right.

The IRS has more visibility into crypto activity than at any point in the asset class's history. Getting your records in order is no longer optional; it's just a question of how you get there.