IRS Begins Enforcing 1099-DA Broker Reporting for Crypto Transactions
Crypto exchanges are now required to report cost basis and gross proceeds directly to the IRS on Form 1099-DA, closing the gap that let self-reported crypto taxes go largely unverified for over a decade.
The IRS has begun enforcing broker reporting requirements under Form 1099-DA, meaning US exchanges must now report gross proceeds, and in most cases cost basis, on customer crypto transactions directly to the tax authority. For a decade and a half, US crypto taxation ran largely on the honour system: exchanges issued informational statements at best, and the IRS had no independent line of sight into what any individual holder actually bought, sold or transferred. That era is over.
What actually changed
The mechanics mirror what's long existed for equities and bonds under Form 1099-B, just adapted for the peculiarities of digital assets. Custodial platforms, brokers and, per the final Treasury rules, some decentralised exchange front-ends meeting the broker definition must now track and report the date acquired, date sold, proceeds and cost basis for covered transactions. Cost basis reporting is being phased in gradually, with 2026 the first full year brokers are required to report it rather than just gross proceeds, giving platforms a runway to build the tracking infrastructure that, frankly, most of them didn't previously need.
The practical effect is that the IRS will, for the first time, receive a data feed on crypto disposals that it can cross-reference against individual tax filings automatically, the same way it's done with brokerage 1099s for stocks for decades. Underreporting crypto gains was already illegal. It just wasn't practically enforceable at scale, because there was no third-party paper trail to check a return against. Now there is.
Why cost basis is the hard part
Reporting proceeds is straightforward: an exchange knows exactly what a customer sold something for. Cost basis is harder, particularly for assets that moved onto the platform from a self-custody wallet, a different exchange, or a DeFi protocol, where the acquisition price simply isn't visible to the reporting broker. The rules address this with a default treatment, unhosted or externally-acquired assets get a cost basis of zero unless the taxpayer can substantiate otherwise, which sounds minor but has real teeth: any holder who bought Bitcoin on one platform in 2018 and later transferred it to another exchange to sell needs documentation ready, or risks the full sale amount getting treated as taxable gain.
That default is going to catch a lot of people who assumed their transaction history would simply follow them. It won't, automatically. Anyone with a meaningful trading history spanning multiple platforms or wallets should be reconciling records now, not waiting for a mismatch notice.
Practical steps for anyone holding or trading
The immediate action item is straightforward even if the underlying record-keeping isn't: pull a full transaction history from every platform used since acquisition, including wallet-to-wallet and cross-exchange transfers, and reconcile it against whatever cost basis method has been used historically, whether FIFO, specific identification or another accepted approach. Basis reporting also locks in a per-account default going forward, meaning taxpayers who want to keep using specific-lot identification to manage which units they're selling need to actively elect that method with each broker rather than assume it carries over.
The bigger picture
This isn't really a crypto story so much as a tax-enforcement story that happens to be landing on crypto. The IRS has spent years signalling this was coming, through subpoenas to major exchanges, through the addition of the crypto question to the front page of Form 1040, and now through 1099-DA. What's changed isn't the tax liability, which was always there. What's changed is that the IRS can now see it without asking, and for an asset class that built part of its early appeal on being outside the visibility of traditional finance, that's a meaningful shift in how the compliance conversation gets framed from here on.
