The new IRS Form 1099-DA aims to streamline cryptocurrency tax compliance starting in 2026, but reporting for decentralized platforms will not begin until 2027.
Starting in 2025, crypto investors across the US will experience a significant change in tax reporting. For the first time, centralized trading platforms like Coinbase and Gemini must directly report transaction data to the IRS, according to CNN. Brokers, defined as entities managing digital assets sold by customers, will provide this information to both investors and tax authorities.
A new form 1099-DA will summarize annual cryptocurrency activity. Similar to 1099 forms for dividends or capital gains, it aims to prevent taxpayers from overlooking crypto earnings. The IRS will access this data starting in early 2026, enabling it to identify discrepancies between individual filings and reported transactions.
Custodial accounts on centralized platforms are subject to this requirement. However, transactions through decentralized platforms such as Uniswap and Sushiswap follow separate rules. Reporting for wallet-to-wallet trades on decentralized platforms will not commence until 2027.
Cost Basis Reporting Delayed to 2026: What It Means for You
The rollout excludes cost-basis reporting for tax year 2025, delaying its inclusion until 2026. Cost basis tracks the purchase price of crypto assets to calculate taxable gains or losses. Investors must manually compute gains and losses during the first year of reporting under the new system.
Investors in newly launched spot bitcoin ETFs will face additional reporting obligations this year. Depending on the provider, they will receive either a 1099-B or a 1099-DA. These forms will outline taxable events, including gains or losses from shares sold by ETF managers to cover operational expenses.
This reporting is not a new tax but a compliance measure to reduce errors and improve tax filing accuracy. The US Treasury emphasized that the 1099-DA aims to remind taxpayers of their duties while streamlining the filing process and reducing costs.
The rules differ for those trading outside centralized platforms. Decentralized exchanges facilitate peer-to-peer transactions without holding assets for users. This distinction delays third-party reporting for such trades until 2027. Even then, these platforms will only report gross transaction proceeds, as they lack access to users’ purchase prices.
Relief for Crypto Holders in 2025
The IRS has issued a temporary relief notice under Section 1:1012–1(j)(3)(ii), providing good news for crypto holders engaging with centralized exchanges in 2025. The relief, effective January 1, 2025, addresses challenges from the recently finalized Section 6045 custodial broker regulations.
Breaking: The IRS just issued a temporary relief notice that is good news for crypto holders interacting with CeFi exchanges in 2025!
— Shehan (@TheCryptoCPA) December 31, 2024
TEMPORARY RELIEF UNDER SECTION 1.1012-1(j)(3)(ii 🧵
These new regulations mandated a first-in, first-out (FIFO) accounting method for crypto assets held with CeFi brokers if users failed to select a preferred method. However, since most CeFi brokers were unprepared to support other methods like Specific Identification (Spec ID), this could have led to unfavorable tax outcomes.
The temporary relief applies to transactions within CeFi exchanges occurring from January 1 to December 31, 2025. It allows crypto holders to use personal records or crypto tax software to document which units they sell, avoiding forced reliance on FIFO during this transition period.
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