IRS gains real-time crypto tax oversight with 1099-DA reporting mandate
In brief
- Form 1099-DA filing required by centralized exchanges starting January 1, 2025
- IRS receives transaction data during 2026 tax season for automated compliance matching
- Cost basis reporting delayed until 2026; 2025 filings report gross proceeds only
- Decentralized exchanges currently exempt from new reporting requirements
- Automated audits triggered by discrepancies between broker reports and taxpayer claims
The New Reporting Framework
The 1099-DA mandate traces back to the Infrastructure Investment and Jobs Act of 2021. Final Treasury and IRS regulations were released in July 2024, establishing the reporting timeline and scope. For 2025 transactions, brokers are only required to report gross proceeds. Cost basis reporting — the figure that determines your actual taxable gain or loss — will not be mandatory until qualifying 2026 transactions.
This phased approach creates a temporary asymmetry. Taxpayers will be responsible for calculating and reconciling their own cost basis during the 2026 filing season. The IRS will hold gross proceeds data but lack the full picture needed for precise enforcement. That changes in 2027, when cost basis data flows in alongside proceeds.
Compliance Pressure Intensifies
Platforms like Coinbase are reportedly preparing to issue millions of these forms, transforming crypto tax reporting into something resembling traditional securities oversight. A February 17, 2026 deadline has been established for many 2025 forms.
The stakes are clear. Once the IRS has gross proceeds data flowing in from major exchanges, any discrepancy between what a broker reports and what a taxpayer claims becomes an automatic red flag. The agency has classified digital assets as property since Notice 2014-21, meaning every sale, swap, or exchange creates a taxable event. Underreporting gains — intentionally or by mistake — now carries real detection risk.
The IRS has indicated it will offer penalty relief for brokers making good-faith efforts to report accurate figures for 2025 transactions. That relief is aimed at brokers, not individual taxpayers who underreport income.
The Loopholes Remain
One important caveat: decentralized exchanges are currently exempt from 1099-DA reporting requirements. Traders using DEXs like Uniswap face no automated reporting pressure — yet. Cost basis reporting starting with 2026 transactions will tighten the net even further. At that point, the IRS will have both sides of the equation: what a taxpayer received and what they paid.
