Form 1099-DA, Digital Asset Proceeds From Broker Transactions, is the broker information return created under Treas. Reg. 1.6045-1. Brokers report gross proceeds for digital asset sales effected on or after January 1, 2025. Basis reporting starts for certain sales effected on or after January 1, 2026. The first forms went out for 2025 sales, and a client's 2026 forms will add a basis figure in box 1g for assets that qualify as covered securities.
The rule that would have swept in decentralized finance front ends did not survive. Congress disapproved it by joint resolution in April 2025. What remains is reporting by custodial brokers and the other brokers described in the final regulations. This article covers what the form reports, which sales produce a basis figure, the thresholds, the penalty relief, and how to reconcile the form to a client's return.
Who has to issue Form 1099-DA?
The instructions define a broker as a person who stands ready to effect sales of digital assets made by others. That includes a person who regularly offers to redeem digital assets it created or issued, and a person who effects dispositions as an agent, dealer, or digital asset middleman. Under 1.6045-1(a)(10)(i)(D), acting as a digital asset middleman for a party to a sale counts as effecting the sale. For digital asset sales, 1.6045-1(a)(1) limits "broker" to a U.S. digital asset broker.
The IRS instructions state the practical result: generally, only a U.S. digital asset broker is required to report on Form 1099-DA. A client who sells through a foreign platform may receive no form, but the sale is still reportable. The IRS page for taxpayers says a taxpayer must report all digital asset income, gains and losses whether or not a form arrives.
What changed with the DeFi rule?
In December 2024 the IRS published a rule titled "Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales" (89 Fed. Reg. 106928, December 30, 2024). Public Law 119-5, approved April 10, 2025, states that Congress disapproves that rule and that it has no force or effect.
The IRS fact sheet on the final regulations says the regulations do not cover brokers that do not take possession of the digital assets being sold or exchanged. Treasury and the IRS said they intend to address those brokers in a different set of final regulations. For a client who trades only through a self-custody wallet and a decentralized protocol, no 1099-DA should be expected from the protocol. The client's own records carry the whole reporting burden.
When does a broker report basis?
Gross proceeds reporting applies to sales effected on or after January 1, 2025. Section 1.6045-1(d)(2)(iii)(B) carves out sales effected before that date.
Basis reporting is narrower. Under 1.6045-1(d)(2)(i)(D), the acquisition information requirement applies to sales on or after January 1, 2026, of covered securities described in 1.6045-1(a)(15)(i)(H), (J) or (K). For a plain digital asset, subparagraph (J) applies when the asset was acquired on or after January 1, 2026, in a custodial account, in exchange for cash, stored-value cards, different digital assets, or other listed property or services.
The 2026 instructions add the second condition: the asset must have been acquired in an account for which the broker provided custodial services and must have been held there until the broker effected the disposition. An asset moved in from another platform or a private wallet is a noncovered security. The broker is not required to report basis for it, though it may do so voluntarily. When it does, it checks box 9 so that the basis information is not subject to penalties under sections 6721 and 6722.
Two other points affect the numbers on the form:
- Box 1f (proceeds) is gross proceeds reduced by digital asset transaction costs, including transaction fees, commissions and transfer taxes.
- Box 1g (cost or other basis) is the adjusted basis of the asset sold. For a noncovered security the broker can leave it blank, and the taxpayer then works out basis from his or her own books and records.
Which small sales can a broker skip?
The instructions describe optional de minimis methods:
| Sale type | No reporting if aggregate gross proceeds, after allocable transaction costs, are |
|---|---|
| Designated stablecoin sales | $10,000 or less for the year |
| Specified NFT sales | $600 or less for the year |
| Processor of digital asset payments sales | $600 or less for the year (above that, all of the customer's sales are reported) |
Because these are optional methods, a broker can still send a form for a small stablecoin sale. A client who receives no form for such a sale has not escaped the reporting duty on the return.
The instructions also state that rewards and staking payments are not reported on Form 1099-DA. A client with staking income needs a separate income schedule built from platform statements.
What relief did the IRS give brokers?
The IRS fact sheet summarizes Notice 2024-56. For 2025 transactions, there are no failure-to-file or failure-to-furnish penalties if the broker makes a good faith effort, and backup withholding relief applies to all 2025 transactions. For 2026, backup withholding relief applies where the broker obtains the customer's TIN and a name-TIN match from the IRS TIN-matching program.
Notice 2024-57 lets brokers hold off filing Forms 1099-DA until further guidance for wrapping and unwrapping, liquidity provider transactions, staking, lending, short sales, and notional principal contracts. The exception does not cover rewards or other compensation. Revenue Procedure 2024-28 gives transitional guidance for allocating unused basis to the digital assets held in each wallet or account as of January 1, 2025.
How should the form be reconciled to the return?
Take a client who sold 2 units of a digital asset at $30,000 each through a U.S. broker in 2026, after buying them in the same custodial account in March 2026 for $41,000 including fees.
- Gross sale price: 2 x $30,000 = $60,000.
- The broker deducts a $150 fee: box 1f = $59,850.
- Box 1g shows the adjusted basis, $41,000, because the asset is a covered security.
- Gain = $59,850 - $41,000 = $18,850.
Now change one fact: the client moved the units in from a private wallet. Box 1f is the same, box 1g is blank or the box 9 flag appears, and the preparer must support basis from the client's purchase records. If the broker's form shows a figure the records contradict, the IRS page says to ask the filer for a corrected form, because the IRS cannot correct a 1099-DA. Report the income as normal and keep the correspondence.
A working file for each client should hold:
- Every 1099-DA, matched to an account statement
- A wallet-level basis schedule that begins with the allocation of unused basis as of January 1, 2025
- A list of foreign-platform and self-custody activity with no form
- Staking and reward income, kept apart from sales
- Fee and transaction cost support for each disposition
What does this mean for audit and review work?
For a company holding digital assets, the broker form is outside evidence of dispositions, but it is not a substitute for fair value support or custody confirmation. See auditing crypto holders under ASC 350-60 and the custody and proof of reserves considerations. For the wider information-return calendar and thresholds, see the 2026 Form 1099 thresholds and the W-2 and 1099 deadlines and penalties.
CORAA prepares ready-to-review audit files for US CPA firms; see /us.
Sources
- Internal Revenue Service, Instructions for Form 1099-DA (2026): https://www.irs.gov/instructions/i1099da
- Internal Revenue Service, Final regulations and related IRS guidance for reporting by brokers on sales and exchanges of digital assets: https://www.irs.gov/newsroom/final-regulations-and-related-irs-guidance-for-reporting-by-brokers-on-sales-and-exchanges-of-digital-assets
- Internal Revenue Service, Understanding your Form 1099-DA: https://www.irs.gov/businesses/understanding-your-form-1099-da
- Cornell Law School Legal Information Institute, 26 CFR 1.6045-1: https://www.law.cornell.edu/cfr/text/26/1.6045-1
- U.S. Government Publishing Office, Public Law 119-5: https://www.govinfo.gov/content/pkg/PLAW-119publ5/html/PLAW-119publ5.htm
Part of CORAA University · Tax and compliance for CPA firms: related guides, calculators and templates.
AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error