Comprehensive Guide to Revenue Procedure 24-28 and Form 1099-DA
Stay ahead of new IRS crypto tax regulations with our guide to Revenue Procedure 2024-28 and Form 1099-DA. Learn about wallet-specific cost-basis tracking, safe harbor allocation, and broker reporting requirements. Prepare for 2026 with Kryptos Tax for seamless compliance.
Written byPayam Masood · Head of Content and Social Media - Kryptos
The IRS is working harder to guarantee accurate tax reporting as the use of cryptocurrencies in the US grows. Important updates are established by Revenue Procedure 2024-28 and the recently introduced Form 1099-DA, such as enhanced broker reporting requirements and wallet-specific cost-basis tracking. All taxpayers and brokers who handle digital assets are subject to these regulations, which go into effect on January 1, 2026.
To maintain compliance and prevent fines, investors, traders, NFT participants, DeFi users, and cryptocurrency enterprises must comprehend and apply these updates.
Why Is the IRS Revising the Regulations Regarding Crypto Reporting?
As the use of cryptocurrencies increases, the IRS has identified gaps in tracking gains, losses, and cost basis. The emergence of decentralized platforms and the fact that there are more than 50 million users of digital assets in the United States have made it difficult for traditional reporting systems to gather reliable data.
Important difficulties include:
Decentralized custody: Resources dispersed among several platforms and wallets.
Transactions that are pseudonymous are difficult to associate with particular taxpayers.
Cost-basis tracking that is inconsistent: Reporting errors have been caused by aggregated approaches.
The IRS's revisions are intended to guarantee that taxpayers fulfill their duties under US tax law while also enhancing accuracy and transparency.
IRS Goals
Boost Reporting Accuracy: Gains and losses are accurately reported thanks to wallet-specific cost-basis allocation.
Mandate Broker Compliance: Exchanges for cryptocurrencies such as Coinbase, Kraken, and Gemini are required to use Form1099-DA to submit comprehensive transaction data.
Minimize Underreporting: Uniform regulations eliminate tax ambiguities and harmonize cryptocurrency taxes with those of conventional financial assets.
Encourage Taxpayer Compliance: Digital asset owner sand their advisors can prepare taxes more easily when there are clear guidelines in place.
IRS Objectives:
Revenue Procedure2024-28: What Is It?
For digital assets held in wallets or accounts as of January 1, 2026, Revenue Procedure 2024-28 creates a safe harbor for taxpayers to allocate unused cost basis.
Important Points:
In the past, taxpayers could combine cost basis across wallets, but this was irregular and challenging to audit.
New regulations require wallets—by account or wallet—through account monitoring.
Effects on Taxpayers
Migration Requirement: Beginning January 1,2026, switch to wallet-specific tracking.
Maintain accurate records by recording all acquisition information, such as dates, cost, and fair market value.
Cost-basis allocations are irrevocable once they are made; they cannot be changed later.
Regular Monitoring: Provides clarity and accountability by coordinating the reporting of digital assets with other financial assets.
Putting the Safe Harbor Allocation Plan into Practice
Under the Safe Harbor plan, taxpayers have a choice between two allocation methods:Particular Unit Assignment
Particular Unit Assignment
Assign each digital asset unit a cost basis using:Date of acquisitionThe cost of purchaseTransaction ID or wallet
Date of acquisition
The cost of purchase
Transaction ID or wallet
Perfect for tax optimization and exact control.
Worldwide Allocation
Use a common approach, like FIFO or LIFO, for all wallets that contain the same asset.
less complicated, but depending on the state of the market, it might be less tax-efficient.
Important prerequisites:
Before the first 2026 transaction or the 2026 tax filing deadline, record the allocation method that was selected.
Keep track of your acquisition history, unused cost basis, and total holdings.
Once recorded, allocations are final and cannot be changed.
Improving Digital Asset Reporting with Form1099-DA
A new IRS requirement for brokers who facilitate transactions involving digital assets is Form 1099-DA. It is intended to improve openness and assist the IRS and taxpayers in precisely tracking gains, losses, and tax liabilities.
Brokers Are Required to Report:
earnings from the sale or exchange of digital assets.
Each transaction's cost basis and acquisition specifics.
Fair market value at the time of exchange, transfer, or sale.
Issuers:
trading platforms, cryptocurrency exchanges, and other middlemen (e.g., Coinbase, Kraken, Gemini).
Due dates:
Form 1099-DA for the previous tax year is issued by brokers by January 31 of each year.
When submitting their annual returns, taxpayers take this information into account.
Steps for Taxpayers to Comply
Assess Digital Asset Holdings: As of January1, 2026, list all wallets and accounts that contain digital assets.
Select the Allocation Method:
For the best tracking, use specific unit allocation.
Global Allocation for more straightforward, consistent reporting.
Keep Correct Records: Keep tabs on sales, transfers, and acquisitions; record unused costs for reporting that is wallet-specific.
Make Krypto Tax Compliance Easier
automates cost-based allocation and tracking.
Both the Global Allocation and Specific Unit methods are supported.
allows for smooth reporting by integrating with data supplied by the broker.
Compliance Steps for Brokers
Brokers must implement system upgrades to comply with Form 1099-DA and wallet-specific tracking:
Upgrade Data Management Systems: Capture acquisition costs and market values accurately.
Adopt Wallet-Specific Basis Tracking: Transition from aggregate tracking to wallet-specific reporting.
Leverage Kryptos Enterprise: Automate transaction tracking and generate Form 1099-DA efficiently.
Example: A major exchange integrates Kryptos Enterprise to manage cost-basis calculations, automate reporting, and comply with IRS standards without disruption.
Important Timelines
Date
Requirement
Pre-2025
Organize digital asset records and implement tracking systems
Taxpayers file 2025 returns incorporating Form 1099-DA data
FAQs
1.Who must issue Form 1099-DA? Brokers, including cryptocurrency exchanges and intermediaries, must issue Form 1099-DA.
2.Are wallet-to-wallet transfers taxable? No. Transfers are non-taxable, but accurate records are required to distinguish them from taxable transactions.
3.Can I save on taxes using Revenue Procedure 24-28? Yes. Using Specific Unit Allocation allows taxpayers to minimize gains by selling higher-cost assets first.
4.What happens if I don’t comply? Non-compliance can result in penalties, IRS audits, and interest on underreported taxes.
5.How does Kryptos help? Kryptos Tax and Kryptos Enterprise automate cost-basis tracking, streamline allocations, and ensure IRS-compliant reporting.
Conclusion
Revenue Procedure 24-28 and Form 1099-DAmark a major shift in digital asset tax compliance. Wallet-specific tracking and structured reporting improve accuracy, reduce underreporting, and align cryptocurrency taxation with traditional financial assets.
Tools like Kryptos Tax and Kryptos Enterprise empower taxpayers and brokers to automate cost-basis tracking, simplify reporting, and meet IRS requirements efficiently. Early adoption ensures smooth compliance, reduces manual work, and eliminates costly errors in 2026 and beyond.
