Tax Law Blog

Brokers and their investor customers in digital assets should prepare, and tax professionals should prepare to assist, with reporting proceeds from certain digital asset transactions. See IRS FS-2025-06, Sept. 25, 2025.

The statements reflecting information reported on Form 1099-DA will differ from other information statements taxpayers receive because most of these statements will not provide basis information regarding a taxpayer’s digital asset transaction(s) for the 2025 tax year.

Taxpayers will need to calculate their basis before filing their 2025 tax return. For more information, see Instructions for Form 1099-DA.

Intro to Form 1099-DA (Digital Asset Proceeds from Broker Transactions)

The new Form 1099-DA is used by brokers to report certain transactions involving digital assets that took place beginning in calendar year 2025. The instructions provide information for brokers to use to complete Form 1099-DA for each sale a broker has affected in 2025.

Broker.

Generally, only a U.S. digital asset broker is required to report on Form 1099-DA. A broker includes any person who, in the ordinary course of a trade or business, stands ready to effect sales of digital assets to be made by others. You are considered a broker with respect to sales of digital assets if:

1. You are a person that regularly offers to redeem digital assets that were created or issued by you, or
2. You effect dispositions of customers' digital assets as an agent, a dealer, or digital asset middleman.

A digital asset middleman includes, but is not limited to:

• Entities that process digital asset payments (with knowledge or reason to know the transaction);
• Digital asset kiosks;
• Real estate reporting persons with knowledge of digital asset use;
• Brokers accepting digital assets for services; and
• Payment processors as described.

Broker does not include persons engaged solely in validation (mining or staking) without other services, and those who solely provide software/hardware to control private keys. Decentralized Finance (DeFi) brokers and some foreign brokers are not required to file a Form 1099-DA with the IRS or furnish a statement to taxpayers showing their digital asset transaction(s)

Sale.

A sale of digital assets effected by a broker on behalf of another person includes:

• The disposition of digital assets in exchange for cash, stored-value cards, different digital assets, or services provided by the broker;
• The disposition of digital assets to pay for securities, commodities, options, regulated futures contracts, securities futures contracts, or forward contracts acquired through the broker;
• The delivery of digital assets pursuant to the settlement of a forward contract, option, regulated futures contract, any similar instrument, or any other executory contract which would be described in the previous bullet if the contract had not been executory;
• For brokers that are real estate reporting persons, the disposition of digital assets in exchange for real property and services; and
• For brokers that are processors of digital asset payments, the payment of a digital asset by one party to a processor of digital asset payments in return for the payment of that digital asset, cash, or a different digital asset to a second party.

For 2025, reporting of gross proceeds is mandatory and reporting of basis information is voluntary. For each digital asset sale that a broker has effected for a customer in 2025, the broker must complete Form 1099-DA but is not required to report basis information. Brokers are not required to report basis information with respect to sales effected in 2025.

In 2026 and later years, reporting of gross proceeds remains mandatory. Brokers will be required to report basis information for covered securities, while reporting of basis information for noncovered securities is voluntary. For each sale of digital assets that are covered securities on or after January 1, 2026, the broker must complete Form 1099-DA. For sales of digital assets that are noncovered securities on or after January 1, 2026, brokers are not required to report basis information but may voluntarily report this information and will not be subject to penalties under section 6721 or 6722 if the broker checks box 9 to indicate that the digital assets are noncovered securities.

Tips for Brokers Preparing Form 1099-DA

TIN Matching. TIN Matching allows a payer who is required to file Forms 1099-B, DA, DIV, G, INT, K, MISC, NEC, OID, and/or PATR to match TIN and name combinations with IRS records before submitting the applicable form. Use Form W-9 to request the TIN of the recipient. For foreign recipients, request that the recipient complete the appropriate Form W-8.

Backup withholding. Persons who have not furnished their TIN to you in the manner required are subject to “backup” withholding on certain amounts required to be reported on Form 1099-DA. See General Instructions and Notice 2024-56.

Telephone number. You must include the telephone number of a person to contact on all 1099-B and 1099-DA information statements.

Truncating recipient's taxpayer identification number (TIN) on payee statements. Pursuant to Treas. Reg. Section 301.6109-4, all filers of Form 1099-DA may truncate a recipient's TIN on payee statements. Truncation is not allowed on any documents the filer files with the IRS.

For sales effected in 2025, you must complete all unnumbered boxes on Form 1099-DA except the CUSIP box. Boxes 1a, 1b, and 1c must be completed. Box 1e must be completed, except when you are reporting using an optional reporting method. Box 1f must be completed, except when box 11c is completed. Boxes 3b, 4, 5, 7, 8, 9, 14, 15, and 16 are completed only if applicable. You are not required to report basis information (boxes 1d, 1g, 1h, 1i, 2, and 6) with respect to the sale of the digital asset but may voluntarily fill out these boxes and will not be subject to penalties under section 6721 or 6722 If you do not report basis information use code Y in the box ‘Applicable checkbox on Form 8949.’

For sales effected on or after January 1, 2026, if the digital asset is a covered security and is not reported using an optional method, boxes 1d, 1g, 2, and 6 must be completed, and boxes 1h and 1i must be completed if applicable. If the digital asset is a noncovered security, you may check box 9. If you check box 9 you do not have to complete boxes 1d, 1g, 1h, 1i, and 6, and you do not have to check box 2. Optional reporting methods. A broker reporting sales of qualifying stablecoins may report a customer's aggregate designated sales for each type of qualifying stablecoin on one Form 1099-DA. A broker reporting sales of specified NFTs may report all of a customer's specified NFT transactions together on a single Form 1099-DA, unless reporting both gross proceeds attributable to first sales by a creator or minter and not first sales.

A broker reporting sales using an optional method is not required to report acquisition dates or basis amounts, even if the digital assets are covered securities. A broker reporting sales using an optional reporting method must complete all unnumbered boxes. For qualifying stablecoins, brokers may leave boxes 1d, 1e, 1g, 1h, 1i, 2, 3a, 3b, 5, 6, 8, 9, 12a, and 12b blank.

Substitute statements.

Brokers may be able to report customer transactions on a single substitute statement. See Pub. 1179. You may furnish to the recipient Copy B of the official IRS form, or you may use substitute Forms 1099-DA if they contain the same language as the official IRS forms and they comply with the rules in Pub. 1179.

In certain cases, it may be possible to report customer transactions for a year, such as securities sales (Form 1099-B), interest earned (Forms 1099-INT and 1099-OID), dividends (Form 1099-DIV), and foreign taxes paid (Forms 1099-DIV and 1099-INT) on a single substitute statement.

Rewards and staking payments.

Do not report rewards and staking payments on Form 1099-DA. Brokers are not required to, but may, file Form 1099-DA for (i) sales for exempt recipients – including corporations, except that covered securities sales for S corporations must be reported; (ii) sales for exempt foreign persons; and (iii) until IRS provides further guidance.

Notice 2024-57 provides that brokers do not have to file information returns for the following digital asset transactions:

1. Wrapping and unwrapping
2. Liquidity provider
3. Staking
4. Lending
5. Short sales
6. Notional principal contract transactions

Identifying a U.S. digital asset broker.

You can treat a customer as an exempt recipient if you receive a properly completed exemption certification on Form W-9 that shows the customer is a U.S. digital asset broker. A broker may require an exempt recipient to file a properly completed Form W-9 or similar form. A broker may treat an exempt recipient that fails to do so as a recipient that is not exempt.

Foreign currency. You must report the amount of foreign currency in U.S. dollars at the spot rate or by following a reasonable spot rate convention. See Reg. section 1.6045-1(d)(8).

Form 1099-DA vs. Form 1099-B (Other 1099s)

If you effected a sale of a digital asset that is also a security for which Form 1099-B would be required (dual classification asset), you should generally file Form 1099-DA and not Form 1099-B.

1. Exception 1: For transactions involving dual classification assets that are digital assets solely because their sales are cleared or settled on a limited access regulated network, as described in Reg. section 1.6045-1(c)(8)(iii)(B), you should file Form 1099-B and not Form 1099-DA.
2. Exception 2: For transactions involving dual classification assets that constitute Section 1256 contracts, including regulated futures contracts or Section 1256 option contracts on digital assets, you should report the Section 1256 contract transactions on an aggregate basis on Form 1099-B. But if delivery of the underlying digital asset is made with respect to a Section 1256 contract, report the delivery of the underlying digital asset as a sale on Form 1099-DA.
3. Exception 3: For transactions involving dual classification assets that are shares in money market funds, you should not file Form 1099-DA and you may (but are not required to) file Form 1099-B. For transactions involving dual classification assets that are tokenized securities, you should file Form 1099-DA and not Form 1099-B.

Deadlines

Brokers must provide a statement reflecting the information reported to the IRS on Form 1099-DA to recipients by Feb. 17, 2026 for 2025 (except as follows).

Forms should be filed on paper by March 2, 2026, or March 31, 2026, if e-filing. Form 1099-DA may not be filed through the FIRE System and must be electronically filed through IRIS Extension of time to file. You can get an automatic 30-day extension of time to file by completing Form 8809 Extension of time to furnish statements to recipients. An extension of time to furnish statements must be requested by fax only.

Penalties

For information about transitional relief from backup withholding for certain digital asset sales effected in 2025, see Notice 2024-56 at IRS.gov/irb/2024-29.

If you are required to e-file but fail to do so, and you do not have an approved waiver, you may be subject to a penalties for Failure To File Correct Information Returns by the Due Date (Section 6721), with penalties increasing the later returns filed. Separate penalties for Failure To Furnish Correct Payee Statements under Section 6722 are applied in the same manner, with intentional disregard penalties of at least $680 per payee statement with no maximum penalty.

Stay ahead of the new IRS digital asset reporting rules by connecting with your tax advisor and legal counsel now to ensure accurate Form 1099‑DA compliance for the 2025 filing season.