Why Your 1099-DA Doesn’t Match What You Actually Owe

Open your exchange dashboard this tax season and you’ll probably find a new document waiting: Form 1099-DA, “Digital Asset Proceeds From Broker Transactions.” If the total on it looks alarmingly high, don’t panic. That number is almost never the amount you owe tax on.

Brokers now have to report digital asset sales under the final regulations (T.D. 10000) that followed the 2021 Infrastructure Investment and Jobs Act. But the way the law phases in, and the way crypto actually moves, means these forms arrive incomplete by design. Here’s what’s missing, and why.

1. For 2025, it reports your proceeds but not your cost basis

This gap is deliberate. For 2025 sales, brokers only have to report gross proceeds, the total value of what you sold. The IRS gave them a pass on cost basis, what you originally paid. That doesn’t become mandatory until sales made on or after January 1, 2026.

So Box 1g, where cost basis would go, sits empty on this year’s form. Copy the proceeds figure onto your return without subtracting your basis and the IRS reads that basis as zero, then taxes you on the entire sale as if it were pure profit.

2. Coins that arrived from another wallet lose their history

Crypto moves between wallets constantly, but your 1099-DA only sees one slice of the journey. Say you bought Bitcoin in a self-custody wallet in 2021, later moved it to an exchange, and sold it there. The exchange only witnesses the sale. It has no idea what you paid, because the coins arrived from outside its walls.

The Treasury calls this a “noncovered security,” and the broker checks Box 9 to flag it. Your proceeds still land at the IRS; the purchase price that would offset them does not. Our USA crypto tax guide shows how to reconstruct that basis.

This gets more consequential in 2026. From January 1, 2026, exchanges have to collect and report cost basis on the assets you sell, and they will look to you for the basis on anything you deposit from an outside wallet, since they cannot see what you paid before it arrived. Kryptos rebuilds that cost basis from your full on-chain and off-chain history, so you have the figures to hand to each exchange when you move tokens between wallets and platforms, and your 2026 forms, which arrive in 2027, actually line up with reality.

3. Every crypto-to-crypto trade is a taxable sale

A common myth is that a 1099-DA only appears when you cash out to dollars. It doesn’t. Under IRS Notice 2014-21, digital assets are property, so every swap is a disposal. Trade ETH for SOL and your broker reports the ETH sale. Sell that SOL for USD later and it reports again. Repeat across a busy year and your total reported proceeds can dwarf what you actually netted, even when your real gain was small.

4. Your broker probably defaulted to FIFO

When you hold several lots of the same coin, the IRS assumes first-in, first-out unless you say otherwise (Reg. 1.1012-1(j)(3)). Many traders would rather use HIFO or specific identification to trim the bill, but if you didn’t give your broker a standing instruction before selling, its form falls back to FIFO, often the least favorable method for you.

Here’s what the form won’t tell you: for 2025, IRS Notice 2025-7 lets you identify specific lots from your own books and records, even if the broker couldn’t process a standing order. With a complete transaction history you can still claim HIFO or specific ID on your return. That is exactly what crypto tax software is built to do.

What to actually do

Whatever the form says, the IRS still expects every gain and loss on Form 8949 and Schedule D, complete or not. So treat the 1099-DA as a starting reference, not the final word. Pull your full history from every exchange and wallet, on-chain and off, into one place, reconcile it, and calculate the figure that is genuinely yours. For a deeper walkthrough of the form, read our complete 1099-DA compliance guide, and see the 1099-DA overview for the essentials.

About the author

Deepak Pareek

Head of Tax & Accounting - Kryptos