Form 1099-DA: Definitive Guide 2024

If you’re buying and selling cryptocurrency, you might receive Form 1099-DA (i.e. “Digital Asset”) in the near future. 

Recent reports suggest that cryptocurrency exchanges may soon be required to send this form to customers. 

In this blog, we’ll break down everything we know so far about Form 1099-DA and explain how it can help you file your cryptocurrency taxes. 

What is a Form 1099? 

Form 1099 is used to report non-employment income (income you receive outside of your job) to the IRS. 

Currently, there are more than 20 different variations of Form 1099. In the past, the versions most commonly used by cryptocurrency exchanges were Form 1099-B, Form 1099-MISC, and Form 1099-K.

For more information, check out our guide to Form 1099 for cryptocurrency. 

What is Form 1099-DA (Digital Asset)? 

An article in Bloomberg stated that the IRS will be unveiling a new version of Form 1099 in the near future: Form 1099-DA. This form is specifically designed to help taxpayers report gains and losses from cryptocurrencies and digital assets. 

The IRS released a draft version of Form 1099-DA in 2024. The form is similar to existing forms like 1099-B — which is commonly used to report capital gains and losses from stocks.

When will I receive Form 1099-DA? 

Form 1099-DA reporting requirements will go into effect during the 2025 tax year. That means that cryptocurrency exchanges will start issuing the form to customers and the IRS in the beginning of 2026. 

It’s important to remember that many exchanges already report taxable income to the IRS. Currently, cryptocurrency exchanges send a variety of cryptocurrency forms to customers including Form 1099-MISC and Form 1099-B. 

Who is required to report Form 1099-DA? 

All ‘cryptocurrency brokers’ are required to issue Form 1099-DA. Based on the Treasury Department’s guidance, this will include 

• Centralized exchanges 
• Decentralized exchanges 
• Certain wallets that allow users to buy, sell, and trade cryptocurrencies 
• Bitcoin ATMs and physical kiosks 

While decentralized exchanges currently do not collect KYC information, they likely will need to start getting this information to comply with Form 1099 reporting requirements.

What happens if I don’t report income reported on Form 1099-DA? 

Not reporting income on Form 1099-DA on your tax return could lead to serious consequences. 

It’s likely that you’ll automatically receive a warning letter from the IRS about your unpaid tax liability. Failure to pay can result in fines, penalties, and even a potential audit. 

Why is the IRS creating Form 1099-DA?

In November 2021, the American infrastructure bill was signed into law by President Biden. The bill stated that cryptocurrency exchanges would be required to report their customer’s capital gains and losses to the IRS through 1099 forms. 

This law drew criticism from prominent voices in the cryptocurrency ecosystem. Critics said that cryptocurrency’s unique properties make it difficult for exchanges to accurately report their customers’ capital gains and losses. 

Form 1099-DA was designed in response to these criticisms. However, Form 1099-DA will not solve many of the unique problems associated with reporting taxes on crypto.

Will Form 1099-DA make it easier for me to file my crypto taxes? 

Form 1099-DA may come with a blank cost basis section if ‘the cost or other basis was unknown to the filer’. As a result, if you transferred your cryptocurrency across different wallets and exchanges, it’s your responsibility to track the cost basis for all of your assets. 

Due to this, Form 1099-DA may make it difficult for investors who use multiple cryptocurrency platforms to accurately calculate their gains and losses. 

For tax purposes, you’ll need to keep a comprehensive record of your cryptocurrency transactions across all of your wallets. For more information, check out our guide to reporting your crypto taxes. 

What’s the problem with 1099 forms? 

Remember, cryptocurrency capital gains are typically calculated through the following formula. 

In this case, gross proceeds are how much you received when you disposed of cryptocurrency. Meanwhile, cost basis is how much you paid to acquire your cryptocurrency. 

Because investors often transfer their cryptocurrency between wallets, exchanges have trouble tracking cost basis. Consider the example in the image below.

If David decides to sell his Bitcoin for $20,000, BlockFi won’t know his original cost basis. His cost basis will likely be reported on his tax Form 1099-DA as ‘missing’ or ‘unknown’ on his 1099 form.  

Unless David can prove that he originally bought his Bitcoin for $10,000, he will be responsible for the full $20,000 of capital gain. As you can imagine, this missing information can create stress and confusion for taxpayers.
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