Form 1099-DA explained: what the first filing season revealed, the cost basis gap that inflates your gains, covered vs noncovered assets, and what changes in 2027

For crypto's entire taxable history, the IRS mostly had to take your word for it. That era ended in February 2026, when the first wave of Forms 1099-DA landed in taxpayers' inboxes and, simultaneously, in the IRS's matching systems. The form is the biggest structural change to crypto taxation since the IRS declared digital assets property, and its first filing season revealed exactly where it helps, where it misleads, and where it sets traps for the unprepared.

Here is what the form reports, what it conspicuously doesn't, and how the rules escalate from here.

What is Form 1099-DA and who sends it?

Form 1099-DA (Digital Asset Proceeds From Broker Transactions) is the information return that digital asset brokers must file with the IRS, with a copy to you, reporting your sales and exchanges. It grew out of the Infrastructure Investment and Jobs Act of 2021 and final Treasury regulations issued in July 2024, which extended the third-party reporting regime that has covered stock brokers since the 1980s into digital assets.

"Broker" covers custodial platforms: centralized exchanges (Coinbase, Kraken, Gemini), hosted wallet providers, digital asset payment processors, and crypto kiosk operators. The reportable events are broad: selling crypto for cash, swapping one token for another, disposing of NFTs and stablecoins, and using crypto to pay for goods or services through a covered processor, including real estate closings that settle in digital assets.

What the form does not cover matters just as much: self-custody wallets, DeFi protocols, and peer-to-peer transactions generally produce no 1099-DA. Congress repealed the regulation that would have extended broker status to DeFi front-ends, so on-chain activity outside custodial platforms remains unreported by third parties. Unreported is not untaxed: every disposal remains a taxable event you must report yourself, and every filer answers the Form 1040 digital asset question under penalty of perjury whether or not any form arrived.

What did the first filing season actually look like?

Messy, in instructive ways. Brokers had until February 17, 2026 to furnish forms for 2025 transactions, and major exchanges blew through it, with some taxpayers notified their forms wouldn't arrive until mid-March, weeks before the April filing deadline. High-volume traders received enormous consolidated statements summarizing thousands of per-transaction reports. And the IRS began receiving, for the first time, a broker-reported number for tens of millions of crypto sales that its automated systems can match against returns.

That matching is the enforcement mechanism to understand. When the gross proceeds on your return don't reconcile with the 1099-DA totals the IRS holds, the mismatch can trigger a CP2000 notice proposing additional tax, or an examination. For 2025, the form was, as one practitioner put it, mainly a flag that you transacted in crypto; the flag now exists for everyone who used a U.S. exchange.

Why is the missing cost basis the biggest trap?

For 2025 transactions, brokers were required to report gross proceeds only. Cost basis reporting was voluntary, and most brokers skipped it, checking the "noncovered security" box instead. So the typical first-year 1099-DA says what you sold and for how much, and nothing about what you paid.

The trap springs in tax software. Import a 1099-DA showing $80,000 in proceeds with no basis, and the software may happily compute an $80,000 gain on assets you bought for $75,000. Practitioners reported exactly this all season: taxpayers staring at six-figure phantom gains because the broker reported a $0 or blank basis for coins transferred in from a hardware wallet. The form is not wrong (proceeds are proceeds); it is incomplete by design, and the basis is your job. Your gain or loss on Form 8949 comes from your records: acquisition dates, purchase prices, and fees, reconstructed across every platform and wallet you've used if necessary.

This is also where the per-wallet basis rule bites. Since January 1, 2025, the IRS requires basis tracking wallet by wallet, eliminating the old universal pooling method that treated all your bitcoin everywhere as one lot pool. Each account's lots stand alone, transfers between your own wallets carry their basis with them (and need documentation to prove it), and the safe-harbor allocation window for assigning historical basis across wallets closed as the rule took effect. Anyone still running a single mental pool across five platforms is calculating gains under a method the IRS no longer recognizes.

What are covered and noncovered securities?

The distinction that controls everything from 2026 forward: a covered security is a digital asset acquired on or after January 1, 2026, in an account where the broker provides custodial services, and held there continuously until sale. For covered securities, the broker must report cost basis and holding period on the 1099-DA, with the first basis-bearing forms arriving in early 2027 for 2026 transactions.

Everything else is noncovered, indefinitely: assets you bought before 2026, assets transferred in from an external wallet or another exchange, and assets from non-custodial sources. Brokers aren't required to report basis on any of it, ever, and industry experts estimate only a small fraction of transactions (perhaps 5% in the first year) will qualify as covered, because the definition breaks the moment an asset moves. The structural gap: unlike the traditional securities world, no broker-to-broker basis transfer mechanism exists for digital assets, so moving coins between exchanges resets them to noncovered even when both ends are fully regulated platforms.

The practical consequence is a permanent two-track system. Your post-2026 buy-and-hold-on-one-exchange lots will show broker-reported basis; your legacy holdings and anything that ever touched self-custody will not, and your own records remain the only basis evidence for them for as long as you hold them.

How do you file correctly with (or without) the form?

Reconcile before you report. Pull your own transaction history from every platform and wallet, compute gains and losses per lot under the per-wallet rule, and compare your proceeds totals against every 1099-DA received. Your return should reconcile with the forms' gross proceeds while reporting your accurate basis; where a broker reported $0 basis on a noncovered lot, you report the true basis on Form 8949 with your documentation behind it, and the totals flow to Schedule D.

Report the unreported too: DeFi trades, NFT sales outside covered brokers, self-custody disposals, staking and mining income (ordinary income at receipt, which also sets basis), and crypto spent on purchases. The IRS's visibility now extends far beyond the forms through exchange records and chain analysis, and the 1040 question makes silence an affirmative misstatement.

If the season already went wrong (a CP2000 mismatch, a phantom gain filed in a rush, or years of unreported activity the new transparency is about to surface), the toolkit is the standard one: amended returns to correct basis errors, and for deeper noncompliance, the same IRS resolution options that apply to any tax debt. The window for cleaning up quietly is the one that's closing: matching gets stricter in 2027 when basis reporting begins, and every subsequent year of broker data makes historical gaps more visible, not less.

The form's arc is set: 2025 transactions established the reporting pipe, 2026 transactions add basis for covered assets, and the taxpayer's basis burden never actually goes away. The investors who come through this transition cleanly are the ones treating their own records, not the broker's form, as the source of truth.