Form 1099-DA: New Crypto Tax Reporting Starts 2025

The Internal Revenue Service (IRS) has introduced Form 1099-DA, a new reporting requirement aimed at bringing cryptocurrency and digital asset transactions into alignment with federal tax laws. 

Starting in 2025, brokers facilitating these transactions will need to issue this form to customers, marking a critical step in addressing longstanding challenges in the reporting of virtual assets.

This is similar to how the IRS requires banks to issue for 1099-INT for interest payments, or stock brokers to issue 1099-B for stock sales.

The IRS’s decision follows a surge in the popularity of cryptocurrencies like Bitcoin and Ethereum, alongside the rapid adoption of non-fungible tokens (NFTs). While the digital asset ecosystem has brought innovation to financial markets, it has also created challenges for regulators, including inconsistent tax reporting and the potential for income concealment.

Related: How Taxes On Cryptocurrency Like Bitcoin Work

Why Is This Form Necessary?

The IRS has faced significant difficulties in ensuring accurate tax compliance within the digital asset sector. Existing reporting mechanisms, such as Form 1099-K and taxpayer-reported gains and losses, have proven inadequate. A lack of standardized reporting has led to incomplete records and potential underreporting of taxable income.

The introduction of Form 1099-DA seeks to remedy these issues. Brokers, including digital trading platforms, payment processors, and hosted wallet providers, will now be required to issue the form for sales or exchanges of digital assets.

For investors, this means clearer guidance on tax obligations and less risk of errors when filing returns. However, investors still need to be vigilant in their tracking.

Related: Best Portfolio Tracking For Cryptocurrency And Stocks

How 1099-DA Works

The new form will require brokers to report transaction details such as gross proceeds, gain or loss, and cost-basis information. This level of detail is intended to provide taxpayers and the IRS with a more transparent and accurate picture of digital asset activity.

Another key aspect of the regulation is its extension to the real estate sector. Entities such as title companies and mortgage brokers will need to report the fair market value of digital assets used in property transactions. This represents a broadening of the IRS’s approach to include non-traditional industries that are increasingly intersecting with cryptocurrency.

Here is what the form looks like:

Challenges For Investors

The new regulations are likely to have far-reaching implications for individual investors and businesses dealing in cryptocurrency. Those engaged in trading, staking, or accepting crypto as payment will need to closely monitor their transactions to ensure compliance.

While the introduction of Form 1099-DA simplifies some aspects of reporting, it also underscores the importance of keeping detailed records. Investors should consider using crypto tax software or consulting tax professionals to stay compliant with the new rules.

Investors need to be mindful of their basis and reporting. Brokers will not be able to access things like DeFi trading or transfers to hardware wallets. Some brokers have already created features to self-report these transactions and associated basis, but investors will need to take action.

Final Thoughts

With the introduction of Form 1099-DA, the IRS is taking a proactive stance in addressing the complexities of the rapidly evolving digital asset economy. As the form becomes mandatory in 2025, taxpayers, brokers, and industry professionals alike will need to adapt to the new landscape.

This initiative represents more than just a regulatory shift; it is part of a broader effort to modernize tax reporting and close gaps in compliance. By bringing digital assets under the umbrella of standardized reporting, the IRS is setting the stage for a more transparent and accountable system.

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