Do you wonder why filing crypto taxes feels like piecing together a puzzle? This article explains how the IRS 1099‑DA form works, what information it provides, and how you can accurately calculate your gains and losses.
The plain explanation
When you sell a digital asset, the IRS wants to know two key numbers: the gross proceeds (how much you received from the sale) and the cost basis (how much you originally paid for the asset, including fees). The difference between the two is your capital gain or loss, which determines the tax you owe.
In 2025 the IRS required cryptocurrency brokers to file a Form 1099‑DA that reports the gross proceeds of certain sales. The form does not include the cost basis. That means the agency can see that a sale happened, but it does not see what you originally paid, leaving you to fill in the missing piece.
To calculate your taxable gain, you must track every purchase, transfer, fee, and sale yourself. This record‑keeping is often called a “transaction history” and should include:
- Purchase date and price (including any transaction fees)
- All transfers between wallets or exchanges (the amount moved and the date)
- Sale date, proceeds received, and any fees paid at the time of sale
- Identifiers such as wallet addresses or trade IDs that tie the movement of assets together
If any of these details are missing, the calculation of your gain becomes inaccurate, potentially leading to over‑ or under‑payment of tax.
A real example
In March 2026, a survey by Awaken Tax found that 21 % of U.S. crypto investors were still waiting for information from an exchange to complete their 2025 returns. A further 20 % said the 1099‑DA they received was incomplete or did not match their own records. One client with over $300,000 in stablecoin trades discovered that the exchange’s 1099‑DA reported less than $100,000 in proceeds, highlighting how incomplete reporting can distort a taxpayer’s picture.
What it means for you
If you trade or move crypto frequently, you will likely receive a 1099‑DA that shows only the proceeds from each sale. You must then:
- Gather your own purchase records from the exchanges or wallets where you acquired the assets.
- Match each sale’s proceeds (from the 1099‑DA) with the corresponding cost basis from your own records.
- Calculate the gain or loss for each transaction and sum them for the tax year.
Failing to do so can result in a “zero‑basis” situation, where the IRS sees the full sale amount as taxable income, dramatically inflating your tax bill.
What to check / how to judge
- Form completeness: Verify that the 1099‑DA lists every sale you made. If a trade is missing, request a corrected form from the exchange.
- Cost‑basis availability: Some exchanges voluntarily include basis information even though it isn’t required for 2025. Prefer platforms that do so.
- Machine‑readable data: Look for CSV or JSON files accompanying the 1099‑DA. These can be imported into tax software, reducing manual entry.
- Transfer tracking: Keep a log of every wallet‑to‑wallet move. The basis follows the asset, so a missing transfer can break the chain.
- Software support: Choose tax software that lets you import 1099‑DA data and manually add missing basis entries.
FAQ
What is the difference between gross proceeds and cost basis?
Gross proceeds are the total amount you receive when you sell a crypto asset. Cost basis is the amount you originally paid for that asset, including any fees. The taxable gain is the proceeds minus the basis.
Do I have to file a tax return if I didn’t receive a 1099‑DA?
Yes. The IRS requires you to report all crypto income and capital gains, even if no form is issued. Your own records are the source of truth in that case.
Can I use the same 1099‑DA for multiple tax years?
No. Each form covers a single tax year. If you received a 1099‑DA for 2025, you must use it only for the 2025 return. For 2026, brokers are expected to report cost basis as well, simplifying the process.
How can I avoid the “zero‑basis” problem?
Maintain detailed purchase records and reconcile them with the proceeds shown on your 1099‑DA before filing. If you spot discrepancies, contact the exchange for clarification and adjust your calculations accordingly.
This article references reporting from cointelegraph.com.
