A new tax reporting form, the 1099-DA, will come into effect in the United States starting in 2025, aiming to standardize the way digital asset transactions—such as Bitcoin and other cryptocurrencies—are reported. For individual traders, this move marks a significant step towards greater financial transparency by subjecting crypto assets to tax procedures much like traditional investment vehicles.
IRS Targets Clarity with 1099-DA’s Inaugural Year
Developed by the Internal Revenue Service (IRS), the 1099-DA represents a key development for both individual investors and brokerage firms active in the crypto market. Set to be implemented in 2025, the form will require brokers to directly report gross proceeds from crypto sales to the IRS. However, in many instances, the “cost basis”—the original purchase price of the asset—will remain blank or incomplete on these reports.
This gap arises primarily because platforms often lack reliable information about prior purchase prices, especially when investors transfer assets between multiple wallets or exchanges. Tracking the transaction history for assets held in personal wallets or moved across different trading venues presents a considerable challenge for brokers, making it difficult to determine accurate purchase prices.
Cost Tracking: The Onus on Investors
With the new regulation, investors will mainly see only their sale proceeds listed on the 1099-DA form. As the IRS guidelines emphasize, it falls on individual investors to keep detailed records to accurately determine their capital gains. The complexity increases when assets are managed across several wallets, exchanges, or even decentralized applications (DApps), causing records to become scattered and harder to consolidate.
While the ethos of the crypto industry rests heavily on mobility and autonomy, the new tax framework nudges users toward consolidating their transactions and maintaining organized records. The IRS has announced that, by 2026, it will mandate more comprehensive cost basis reporting, urging investors to pay close attention during this transitionary period to ensure compliance.
Lingering Uncertainties and Pressures for Crypto Holders
Omitting cost basis details in tax reports may result in investors overpaying taxes, as declaring only gross proceeds could greatly inflate perceived profits. The IRS has reiterated in its guidance that the responsibility for accurate gain calculation remains with the individual taxpayer.
For instance, if an investor sells cryptocurrency for $50,000 with an actual cost of $40,000, the real gain is $10,000. Without reporting the $40,000 cost, the taxable amount could be mistakenly calculated at the full $50,000.
Within the current system, any mismatch between tax returns and the reported figures from 1099-DA forms may automatically trigger a CP2000 notice from the IRS. Even those who have not yet received such letters or alerts should be aware that misreporting raises the ongoing risk of paying excess taxes.
During 2025—the first year of the new process—brokers will benefit from temporary exemptions protecting them from penalties for well-intentioned reporting mistakes. However, stricter standards and increased scrutiny are expected in the years that follow. There are also provisional exceptions covering certain types of operations, such as staking or providing liquidity, which remain outside mandatory reporting for now.
Beyond the US, similar regulatory momentum is building globally. The European Union’s DAC8 and the OECD’s Crypto-Asset Reporting Framework are set to impose parallel requirements. These international measures collectively reinforce the position of cryptocurrencies within financial markets and further strengthen the infrastructure for transparent transaction monitoring worldwide.
