A New Era of Crypto Tax Reporting
As digital assets become a key part of the modern financial landscape, tax reporting rules are evolving to provide greater clarity and ensure compliance. We understand that tax changes can be confusing, and our goal is to make this transition as clear as possible for you.
A landmark development in this area is the introduction of Form 1099-DA, Digital Asset Proceeds from Broker Transactions. This new document establishes a clear, consistent standard for how digital asset brokers report transaction details to both their customers and the IRS. This move aligns the tax reporting for digital assets with that of traditional financial instruments, such as stocks, which rely on the similar Form 1099-B.
Frequently Asked Questions (FAQ) Regarding Form 1099-DA
Q: What is the new Form 1099-DA?
Form 1099-DA is a new tax information document created by the IRS specifically for reporting the proceeds generated from digital asset transactions. Its primary function is to provide you and the IRS with the essential details regarding your sales and exchanges of cryptocurrencies and other digital assets, thereby helping to streamline the tax reporting process. This new standard will replace the Form 1099-B that some exchanges previously used for this purpose, promoting clarity across the industry.
Q: Why am I receiving a Form 1099-DA?
You will receive this form because of new federal regulations enacted under the Infrastructure Investment and Jobs Act. This law mandates that all U.S.-based digital asset brokers (including exchanges) must track and report customer transaction activity to both the customer and the IRS. Form 1099-DA is the official document required for this mandatory reporting.
Q: What types of transactions are reported on this form?
The form is designed to report dispositions of digital assets. This primarily includes:
Sales of crypto for U.S. dollars or other fiat currency.
Exchanges where one cryptocurrency is traded for another.
Spending crypto used to purchase goods or services.
The form will detail key information, including the gross proceeds from your transactions and, when available, the cost basis (the original value of your asset). It is also important to note that certain on-chain transfer fees may be reported as a disposition of a digital asset.
Q: What types of transactions are not reported (non-taxable event)?
The actions that generally do not trigger a tax or reporting requirement are:
Buying crypto with U.S. dollars.
Holding your crypto.
Transferring crypto between your own wallets (e.g., from your exchange account to your personal hardware wallet).
Gifting crypto to someone (though gift tax rules may apply to very large amounts).
Simply buying crypto with U.S. dollars (like on our exchange) and holding it is not a taxable event. You don't "realize" a gain or loss until you sell, trade, or dispose of it.
Q: When will I receive my Form 1099-DA?
We are required to begin issuing Form 1099-DA for the 2025 tax year. This means you should expect your first Form 1099-DA to be available for download in mid-February 2026 to report the transaction activity that occurred during the 2025 calendar year.
Q: Can I rely solely on the Form 1099-DA for my cost basis?
A Critical Consideration: While Form 1099-DA is an important tool, it is not a substitute for maintaining your own personal records.
A key limitation is that the cost basis information may be incomplete. If you transferred digital assets into your account from an external wallet or another platform, we will not possess information regarding the original purchase price. In such cases, the cost basis may be reported as zero or left blank. Relying solely on an incomplete form in this situation could lead to a significant overstatement of your capital gains. Therefore, you must continue to maintain detailed records of all digital asset transactions to ensure the cost basis you report is accurate.
Q: Will the IRS also receive a copy of my Form 1099-DA?
Yes, we are legally required to provide a copy of your Form 1099-DA directly to the IRS. This means the IRS will have the same summary of your transaction proceeds that you receive.
💰 Understanding Your Profit: Gains, Losses, & Cost Basis
Q: What is "cost basis"?
Your cost basis is, simply, the total amount you paid to get your crypto, including any fees. For example, if you bought 1 ETH for $2,000 and paid a $50 transaction fee, your cost basis for that 1 ETH is $2,050. Knowing this is essential to calculate your profit or loss.
For the 2025 tax year we are required to report your gross proceeds from the sale, exchange or spending transactions. For the 2026 tax year (reported in early 2027) we are also required to report your cost basis.
Q: What are "capital gains" and "capital losses"?
Capital Gain: This is your profit. If you bought crypto for a cost basis of $1,000 and later sold it for $1,500, you have a $500 capital gain.
Capital Loss: This is your loss. If you bought that same crypto for $1,000 and sold it for $700, you have a $300 capital loss.
Q: What is the difference between "short-term" and "long-term" capital gains?
It all depends on how long you held the asset before selling it.
Short-Term: You held the crypto for one year or less. These gains are typically taxed at the same rate as your regular income.
Long-Term: You held the crypto for more than one year. These gains are taxed at lower, more favorable rates.
Disclaimer: This information is provided for general informational purposes only and is not intended to be, and should not be construed as, tax or legal advice. We strongly recommend that you consult with a qualified tax professional to discuss your specific personal tax situation.