COMPLIANCE · UPDATED FOR 2025

Your 2025 1099-DA Readiness Checklist

The IRS is phasing in 1099-DA reporting. Here’s what every crypto holder needs to do before brokers start sending forms in early 2026.

Phase 1: 2025 Gross Proceeds Reporting

Starting January 1, 2025, brokers subject to IRC §6045 are required to report gross proceeds from digital asset dispositions on Form 1099-DA. This is not a pilot program — it is the law. Every sale, every swap, every disposition that moves through a covered broker will be reported to both the IRS and the taxpayer.

Phase 1 requires only gross proceeds and the date of disposition. Basis reporting does not begin until Phase 2. This means the IRS will have your total proceeds for every covered transaction — but brokers are not yet required to match those proceeds with your cost basis. That creates a window where the IRS has one number and you need to be ready to explain it with correct basis documentation.

The critical point about Phase 1: you do not know whether your broker is reporting correctly until you see the 1099-DA. Brokers may misclassify transfers as dispositions, report incorrect dates, or include transactions that should not be on the form at all. Every 1099-DA you receive needs to be reviewed against your actual records before you sign your return.

Phase 2: 2026 Basis Reporting

Beginning with the 2026 tax year (returns filed in early 2027), brokers must report adjusted basis for “covered” transactions — those where the broker has a record of both the acquisition and the disposition. This is analogous to how brokerage firms report cost basis for stock transactions under IRC §6045(g).

The $0-basis problem becomes systemic in Phase 2. Assets that were acquired before the covered period, held in self-custody wallets, or transferred between exchanges will frequently appear with $0 reported basis — because the broker has no record of the acquisition. Filing with those $0-basis figures means paying tax on the full proceeds as if you had zero cost — even if you paid full market price for every token.

Preparing for Phase 2 means having your complete acquisition history documented now — not in 2027 when brokers start sending basis-inclusive 1099-DAs and you are trying to reconstruct records from 2019.

What to Gather Right Now

1. Complete Wallet Inventory

List every wallet address and exchange account that has ever held your digital assets. This includes:

  • Hardware wallets (Ledger, Trezor, Coldcard)
  • Software wallets (MetaMask, Phantom, Keplr, Rabby, Trust Wallet)
  • Centralized exchanges (Coinbase, Kraken, Binance.US, Gemini, Crypto.com)
  • DeFi protocols where assets are deposited (Aave, Compound, Uniswap LP positions)
  • Custodial accounts at traditional brokers that now support crypto (Robinhood, Fidelity, Schwab)

A wallet you forget now is a wallet that creates a phantom gain on your 2026 return when an asset transfers out of it onto a 1099-DA-covered exchange.

2. Historical Transaction Exports

Download every available transaction export from every exchange and wallet you have ever used. For centralized exchanges, this typically means CSV exports of all trades, deposits, withdrawals, and earned rewards. For self-custody wallets, it means using a tool like Koinly, CoinTracker, or CryptoTaxCalculator to import on-chain history from the blockchain.

The further back you can reconstruct, the cleaner your basis records will be. If you purchased ETH on Coinbase in 2017 and still hold it in a MetaMask wallet, that 2017 purchase is your cost basis — and you need the record to prove it when the 1099-DA reports a 2025 disposition with $0 basis.

3. Cost Basis Methodology Decision

Under Rev. Proc. 2024-28, you must now track basis wallet-by-wallet rather than across a universal pool. Within each wallet, you can use specific identification (HIFO or FIFO or LIFO) or a default method. The methodology decision affects your tax significantly:

  • HIFO (highest-in, first-out): Sells the highest-cost lots first, minimizing current-period gains. Best for clients who want to minimize tax this year.
  • FIFO (first-in, first-out): Sells the oldest lots first. Often results in long-term capital gain treatment but may produce larger gains if early acquisitions were cheap.
  • Specific identification: Choose which specific lot to sell at disposition time. Maximum flexibility but requires documentation at the time of each sale.

“The methodology decision is not just a tax question — it is a documentation question. If you claim specific identification but have no contemporaneous records showing which lots you sold, the IRS will default you to FIFO. Choose a method you can actually maintain.”

— Saim Akif, CPA

How to Reconcile Against Broker Reports

When you receive your 2025 1099-DA in early 2026, the reconciliation process works as follows:

  1. Match every 1099-DA line to a transaction in your records. Every disposal reported by the broker should correspond to an identifiable transaction in your own records. If you see a line you cannot match, it may be a transfer being incorrectly reported as a disposition.
  2. Check the proceeds amount. The broker’s reported proceeds should match your records. Discrepancies can arise from fee treatment, rounding, or timing differences.
  3. Check the acquisition date. This determines short-term vs. long-term treatment. A wrong date on the 1099-DA requires a Code adjustment on Form 8949.
  4. Check the reported basis (Phase 2 only). In 2026 and beyond, compare the broker’s reported basis to your actual documented cost. Where they differ, you must file a Code B adjustment on Form 8949 with supporting documentation.

What to Do When Discrepancies Appear

The IRS does not expect every 1099-DA to be perfect. The system for correcting broker errors is built into Form 8949:

  • Code B: Used when the basis on the 1099-DA is incorrect. You report your corrected basis in column (e) of Form 8949 and note the adjustment.
  • Code O: Used for other adjustments — for example, when a disposition is incorrectly included on the 1099-DA (such as a non-taxable transfer).
  • Code T: Used when the holding period reported by the broker is wrong.

The critical requirement: every adjustment code must be supported by documentation. The IRS may ask you to substantiate the correction, and “I thought my basis was higher” is not documentation. Chain data, exchange records, and acquisition receipts are documentation.

Under IRC §6045, brokers are required to provide corrected 1099-DAs if you notify them of an error. In practice, the correction process is often slow and unreliable. Filing with Form 8949 adjustments is almost always faster and more reliable than waiting for a corrected form.

When to Call a CPA

You should involve a crypto-specialized CPA before filing if any of the following are true:

  • You have transactions across more than two exchanges or wallets
  • You have any DeFi activity: liquidity pools, yield farming, staking, lending
  • You have NFT transactions with more than one purchase or sale
  • You transferred assets between your own wallets at any point during the year
  • Your 1099-DA shows a basis that you believe is incorrect
  • You have received an IRS letter about any prior-year crypto activity
  • You have not yet made the Rev. Proc. 2024-28 wallet-by-wallet election

The cost of a CPA review is almost always less than the cost of overpaying because a 1099-DA was filed uncorrected. A 30-minute intake call is the fastest way to know where you stand.

IRS references in this article: IRC §6045, Rev. Proc. 2024-28, Form 1099-DA, Form 8949, Rev. Rul. 2023-14

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