IRS Form 1099-DA requires cost basis reporting in 2026

The United States moved digital asset tax reporting onto the same footing as brokerage reporting for stocks, and 2026 is the year the second half of that transition takes effect. Form 1099-DA has been mandatory since the start of 2025, but what brokers actually have to put on it changes with the current filing year.

What the form covers and who files it

The IRS requires brokers to report digital asset transactions using Form 1099-DA beginning January 1, 2025. The obligation falls on custodial brokers, meaning intermediaries that take possession of digital assets on a customer’s behalf. That definition sweeps in crypto exchanges, hosted wallet providers, digital asset kiosks, and certain payment processors. The common thread is custody: if a business holds the assets rather than merely facilitating a transaction between two self-custodied parties, it is the party the IRS expects to file.

The shift mirrors a change the IRS made to conventional brokerage reporting more than a decade earlier, when Form 1099-B was expanded to include cost basis for stock and mutual fund sales. That earlier transition took years to implement cleanly, precisely because basis tracking across account transfers, corporate actions and partial sales is harder to standardize than a simple sale-price report. Digital assets add a further complication that stock transfers mostly avoid: a coin can move between custodians, wallets and platforms with no equivalent to the standardized transfer paperwork that exists in traditional brokerage, so a broker receiving a customer’s crypto from an external wallet often has no reliable way to know what that customer originally paid for it.

Gross proceeds first, basis second

The rollout was deliberately staged. For the 2025 filing year, brokers were required to report gross proceeds from digital asset transactions, which is the sale-side number without any accounting for what the customer originally paid. Starting with the 2026 filing year, brokers must also report basis information on certain transactions. That is the harder half of the job, because basis depends on acquisition history a broker may not fully hold, particularly for assets transferred in from elsewhere.

Also starting in 2026, real estate professionals acting as brokers in transactions must report the fair market value of digital assets used in real estate deals. This extends the reporting perimeter beyond exchanges and into closings where crypto changes hands as consideration for property.

Transition relief that is still running

The IRS has been explicit that it does not expect a clean first pass. Notice 2024-56 and Notice 2025-33 together provide transition relief under which the agency will not impose penalties for failure to file correctly, provided the broker made a good-faith effort to file correctly and on time. That relief extends through 2027 for backup withholding under specific conditions, including compliance with TIN verification and treatment of pre-existing non-U.S. accounts.

The practical effect is that a broker filing an imperfect 1099-DA in good faith is in a materially different position from one that did not file at all. The relief covers accuracy, not absence.

Why the custodial line matters so much

The custodial-versus-non-custodial distinction that determines who has to file is not a minor technical detail; it is the organizing principle of the entire regime. A centralized exchange holding customer coins has the transaction history, the account records and the identity information needed to produce a report, the same way a traditional brokerage does for stock trades. A decentralized protocol that merely routes a swap between two self-custodied wallets, with no entity ever taking possession of the assets, does not have any of that, and treating it as a broker would require either inventing an intermediary that does not exist in the transaction or imposing recordkeeping obligations on software rather than a business. That is a large part of why the reporting obligation has been built around custody rather than around the broader category of anything that facilitates a crypto transaction, and why the definition of “broker” under this regime has been one of the more contested pieces of the underlying rulemaking.

Transactions carved out for now

Notice 2024-57 temporarily exempts several transaction categories from 1099-DA reporting until further guidance is issued. Those categories include token wrapping and unwrapping, staking and liquidity-provider transactions, digital asset lending and short sales, and notional principal contracts. These are the transaction types where existing tax characterization is least settled, and the IRS chose to hold off on reporting mandates rather than force brokers to report figures under rules that do not yet exist.

Two points matter for anyone reading their own forms. The exemption applies to broker reporting, not to whether the underlying activity is taxable. And it is temporary by design, so the carve-outs are expected to narrow as guidance is issued.

Aggregation and the basis allocation fix

Not every transaction gets its own line. Brokers may use aggregate reporting for stablecoin and NFT sales above certain de minimis thresholds, with separate thresholds applying to payment processors. That concession reflects transaction volumes in those two categories, where per-sale reporting on high-frequency stablecoin activity would produce forms of little analytical value.

The transition also created a genuine accounting problem, because the new regime requires per-account identification of basis rather than a universal pool across all of a taxpayer’s holdings. Revenue Procedure 2024-28 addresses it by permitting taxpayers to allocate unused digital asset basis to remaining units as of January 1, 2025. That allocation was the mechanism for carrying pre-2025 basis into an accounting model that assumes it was tracked per account all along.

Where this leaves taxpayers

For US taxpayers, the shift is that the IRS is now receiving third-party data on crypto disposals directly from custodians rather than relying on self-reporting alone. During 2026, the figures on a received 1099-DA may still be incomplete, especially where assets moved between platforms and basis history did not travel with them. Reconciling a broker’s reported basis against a taxpayer’s own records is the step that matters most in this filing year.