Crypto faces IRS reporting as 1099‑DA set for 2025–26

What’s changing with crypto taxes this year: 1099-DA and basis rules

A new federal information form for digital assets, Form 1099-DA, begins shaping crypto tax compliance this season. As reported by Forbes (final rules summary), brokers are expected to send 1099-DA with gross proceeds for tax year 2025 (filed in 2026), while cost-basis reporting for covered assets starts with tax year 2026.

Alongside the form rollout, taxpayers are being directed to maintain wallet-by-wallet cost basis rather than pooling holdings across platforms. According to KoinX’s regulatory overview, the requirement is to track cost, gains, and losses separately for each exchange account and self-custodied wallet so basis follows the asset through transfers and dispositions.

On accounting conventions, centralized platforms are expected to apply first-in, first-out (FIFO) by default unless a user properly specifies another method. As reported by The Block, that default can materially change gains and losses versus other allowed approaches when earlier, lower-basis lots are sold first.

Why IRS broker reporting and DeFi self-reporting matter

Expanded broker reporting is intended to increase visibility into taxable crypto activity and reduce mismatches between what traders file and what regulators see. As reported by The Street, experts warn that Form 1099-DA and parallel global initiatives are narrowing opportunities to omit transactions, increasing the likelihood of automated notices when returns diverge from reported proceeds.

Decentralized finance remains a self-reporting regime even after repeal efforts targeting DeFi broker rules. As reported by Bloomberg Law, the absence of a DeFi reporting mandate does not remove a filer’s duty to report swaps, staking rewards, and other on-chain activity; it simply shifts the burden to the individual to maintain complete records.

Industry practitioners emphasize that visibility into centralized trading will rise while self-custodied and DeFi activity still relies on meticulous record-keeping. “Once Form 1099-DA goes out, there’s nowhere to run … exchanges are going to expose all your trades to the IRS,” said Sharon Yip, CPA, at ChainwiseCPA, noting that proceeds-only forms can look large until properly reconciled with basis.

Choose FIFO vs specific identification; preserve wallet-by-wallet basis

Choosing an accounting method affects reported gains, cash taxes, and audit clarity. According to KPMG’s Jamison Sites, many exchanges are rolling out features to capture or import cost basis, but filers still need to ensure that basis is preserved as assets move across exchanges and self-custody so the method they elect can be applied consistently.

Under FIFO, earlier purchases are treated as sold first, which can increase taxable gains in rising markets if those early lots have low basis. With specific identification, a filer may select higher-basis lots for disposition when properly documented, but that approach depends on accurate lot-level records aligned to each wallet or account and clear evidence that the identified units were actually disposed.

At the time of this writing, Bitcoin hovered near $67,912 with very high recent volatility, underscoring how accounting choices can swing outcomes as prices move. Context like this is separate from tax rules but reinforces why consistent wallet-by-wallet basis and documented lot selection are critical to accurate filings.

If 1099-DA proceeds don’t match your reported gains

A 1099-DA that shows large gross proceeds will rarely equal your taxable gain because proceeds exclude your cost basis, fees, and other adjustments. Differences commonly arise when assets were transferred between platforms without basis data attached or when multiple lots with different basis were involved in a disposition.

If amounts differ, the expected approach is to reconcile proceeds to gains and losses on the return using your records, reflecting basis carried into each wallet and the accounting method applied. Where basis is missing, regulators may assume zero basis unless you can substantiate it, so contemporaneous histories from exchanges, wallets, and bridges are essential to show that proceeds were offset by cost and allowable expenses.