IRS to Require New 1099-DA Reports for Crypto Sales Starting With 2025 Returns

The Internal Revenue Service is introducing a broad reporting mandate for cryptocurrency brokers that will take effect with the 2025 tax filing season. Under the new rules, platforms processing digital asset transactions must issue Form 1099-DA for each sale executed after Jan. 1, 2025, detailing gross proceeds. Beginning with the 2026 tax year, those forms must also include cost-basis information for covered securities, bringing cryptocurrency disclosure closer to long-standing equity reporting requirements.

Greater visibility for the IRS

Digital assets have been treated as property since 2014, meaning gains or losses arise when tokens are sold, exchanged or otherwise disposed of. Until now, most brokers did not supply investors or the government with standardized year-end statements, making it easier for taxpayers to under-report or omit transactions. Industry specialists expect the upcoming 1099-DA regime to curtail that gap by giving the IRS matching data it can cross-check against individual returns.

Financial advisor Ric Edelman, who founded the Digital Assets Council of Financial Professionals, noted that many holders “mistakenly believe” reporting is optional. The new form removes that ambiguity, and failure to declare taxable events could trigger penalties once third-party documentation reaches the IRS.

Why recordkeeping matters now

The impending cost-basis requirement heightens the need for accurate transaction histories. Consider an investor who bought one ether for $1,500 and paid a $50 network fee; the basis is $1,550. Selling that token for $2,000 would create a $450 capital gain. If the coin were moved between wallets or exchanges before the sale, the receiving broker might see only the transfer-in value, not the original purchase price, unless the owner supplies it. Taxpayers remain responsible for substantiating every figure they report, according to Daniel Hauffe of the American Institute of Certified Public Accountants.

Specialized software providers such as ProfitStance, TaxBit, TokenTax and ZenLedger consolidate data across multiple platforms and can generate the forms required for federal returns. Edelman recommends automated tools over manual spreadsheets because dispersed wallets, airdrops and token swaps quickly complicate reconciliation.

Unsettled rules for staking and other activities

Although the IRS issued foundational guidance on virtual currencies a decade ago, newer activities—including proof-of-stake rewards, decentralized finance lending and non-fungible token trades—still lack comprehensive regulations. In Notice 2024-57, the agency said it is studying assorted transaction types and will not levy penalties on certain items while rules are finalized, but taxpayers must keep records in anticipation of future clarification.

Staking rewards are a particular focus. Current IRS position treats the tokens earned through staking as ordinary income at the moment they are received, even if the investor continues to hold them. Advocates argue taxation should occur only when those rewards are sold or spent. Guidance is expected in 2025, and interest is growing after regulators allowed exchange-traded funds to distribute staking yields, expanding the practice to a wider investor base.

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Year-end strategies amid market volatility

Bitcoin surged to record highs earlier this year before retreating by more than $40,000, creating opportunities for both tax-loss and tax-gain harvesting. Investors realizing losses before Dec. 31 can offset gains elsewhere in their portfolio, while realizing gains may be attractive for those in lower brackets or expecting higher income later. Long-term capital gains rates of 0%, 15% or 20% apply to assets held for more than 12 months; short-term gains are taxed at ordinary income brackets ranging from 10% to 37%.

Given the fluid regulatory landscape, consultants urge taxpayers to verify that each digital-asset entry appears on the correct form. Capital disposals generally belong on Form 8949, while wages or contractor payments in cryptocurrency go on Form 1040. The front page of Form 1040 also asks whether the filer received or disposed of digital assets during the year. “Received,” the IRS clarifies, refers to items such as compensation, staking rewards, mining proceeds, airdrops linked to hard forks and similar events—not routine purchases on exchanges.

Need for informed professional advice

Edelman and other specialists caution that many traditional accountants lack specific training in digital asset taxation. Errors can occur if advisors are unfamiliar with token splits, gas fees or the nuances of decentralized protocols. Investors with complex histories or large positions are encouraged to consult professionals who routinely handle cryptocurrency filings to minimize audit risk and ensure compliance as the new 1099-DA framework takes effect.

Crédito da imagem: Kent Nishimura | Reuters