Digital asset owners have long known that the Internal Revenue Service has a keen interest in them.
In 2019, the IRS sent letters to around 10,000 cryptocurrency owners it believed might have failed to report related transactions. Basically, cryptocurrency is considered an asset, like stocks or other property, and sales of these assets that result in a profit trigger potentially taxable capital gains.
The following year, the IRS added a virtual currency question to Form 1040. It’s tweaked the filing season query a bit each year, and added it to more 1040 versions, to get more, and more accurate, data on digital transactions.
Starting in 2026, Uncle Sam will have an even better way to get taxable digital transaction information. It will start getting third-party verification of some crypto moves.
The new Form 1099-DA, Digital Asset Proceeds From Broker Transactions, will be sent by Feb. 17, 2026 to taxpayers who use brokers to facilitate such activity. As with all 1099 forms, the IRS will be copied.
Since 1099-DA is a new form, and because even after all these years there still is confusion about taxable digital transactions, the IRS is asking for help from tax professionals who have clients who make digital transactions.
It wants tax pros to take some steps now to get their affected clients ready for the new form and tax filing it will require.
Getting ready for 1099-DA: Notably, says the IRS, the statements reflecting information reported on Form 1099-DA are different from some other investment statements taxpayers are used to receiving.
Most of these statements will not provide the basis of the taxpayers’ digital asset transaction(s) for the 2025 tax year. Rather, the taxpayers must calculate the basis before they can file their 2025 tax return.
The best way to arrive at the correct basis is detailed record keeping.
Quick tax note. Thorough record keeping is the smartest move any taxpayer can make, regardless of how simple or complex the tax circumstances.
Also, notes the IRS, Decentralized Finance (DeFi) brokers and some foreign brokers are not required to file a Form 1099-DA with the IRS or furnish a statement to taxpayers showing their digital asset transaction(s).
Finally, taxpayers need to understand their digital asset tax obligations, regardless of whether they receive a statement showing all taxable digital asset activities. IRS.gov has more on these responsibilities at its special online pages discussing digital assets and reporting digital asset transactions, as well as in the Form 1099-DA instructions.
Consider tax pro help: While the IRS outreach is aimed at tax pros, it's a good reminder for folks who have digital assets to consider getting professional tax help. That's especially true, with 1099-DA forms coming next year, if you own and have made or will make digital transactions this year.
Tax pros can help ensure that you comply with your crypto, and other, tax obligations. They also have software that can help with the process.
This includes applying appropriate cost basis methods and document findings, as well as accurately categorizing digital income events.
They also can help you review and reconcile multiple digital transactions that may be spread over different exchanges, wallets, and accounts.
You also might find these items of interest:
- Treasury and IRS want your thoughts on digital assets and Direct File
- IRS unveils draft 1099-DA for future digital asset transaction reporting
- IRS offers guidance on how to answer the tax return digital assets question
