1099-DA compliance for crypto platforms: New rules and requirements

The IRS has introduced Form 1099-DA to enhance information reporting for digital asset transactions. The form creates a standardized framework for reporting sales and exchanges of cryptocurrencies and other digital assets, aligning them with the information reporting requirements that already apply to traditional securities and commodities. This change reflects the government’s ongoing effort to improve visibility into taxable digital asset activity and ensure taxpayers receive consistent data for accurate return filing.

Form 1099-DA brings digital asset reporting more closely in line with traditional financial assets. Similar to broker-dealer compliance with Form 1099-B for securities, this new information reporting form requires platforms that qualify as digital asset brokers to report taxable dispositions of digital assets to both taxpayers and the IRS. The purpose is to standardize digital asset reporting, improve taxpayer compliance, and enhance transparency across the crypto ecosystem.

This article outlines the key aspects of 1099-DA compliance for crypto platforms and digital asset brokers, including which platforms fall within the IRS definition of a broker, requirements and challenges for cost basis tracking, and the foundational steps brokers should take to remain compliant while issuing users accurate tax information.

What’s a digital asset broker?

Under the IRS’s regulations, a digital asset broker is 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 (Reg. § 1.6045-1(a)(1)). A person is considered a broker if they:

• Regularly offer to redeem digital assets that they created or issued, or
• Effect dispositions of customers’ digital assets as an agent, dealer, or digital asset middleman.

In plain terms, brokers are intermediaries that control or custody customer digital assets and execute or settle transactions on behalf of those customers. Only U.S. digital asset brokers, that is, U.S. persons or qualifying U.S. branches that effect sales for others, are required to file Form 1099-DA.

The broker definition applies primarily to custodial or intermediary businesses that can identify their customers and facilitate transactions, including:

• Custodial trading platforms (commonly called centralized exchanges).
• Hosted wallet providers that control users’ private keys and carry out trades or redemptions on their behalf.
• Processors of digital asset payments (PDAPs) that accept or convert crypto payments between buyers and merchants when they take possession of the digital assets.
• Issuers of redeemable tokens or stablecoins that regularly offer to redeem those assets from holders.

Certain participants are outside the scope of Form 1099-DA reporting:

• Decentralized or non-custodial platforms that merely publish or maintain smart contract code and do not custody assets or identify users.
• Proof-of-work and proof-of-stake validators that provide only network validation services without acting as intermediaries.
• Software and hardware providers that sell or license wallets or tools enabling users to self-custody digital assets without facilitating trades.

1099-DA reporting requirements for crypto platforms

Starting with transactions effected in 2025 (reported in 2026), brokers must file Form 1099-DA, Digital Asset Proceeds From Broker Transactions, for each sale or disposition of a digital asset they execute on behalf of customers. The form provides standardized information that enables taxpayers and the IRS to reconcile digital asset proceeds with income tax filings.

Each Form 1099-DA must include, for every reportable transaction:

• Customer identifying information: The customer’s name, address, and Taxpayer Identification Number (TIN) collected through the broker’s KYC process.
• Asset identification: The name and DTIF identifier of the digital asset sold.
• Quantity disposed: The number of digital asset units sold or exchanged.
• Disposition date: Required for each reportable sale, except when the broker uses an optional reporting method for qualifying stablecoins or specified NFTs.
• Gross proceeds: The total amount realized from the sale or disposition.
• Acquisition date, cost basis, and holding-period classification: These three items are reported based on whether the asset is covered or noncovered (see below).

Covered vs. noncovered digital assets

Covered digital asset: A digital asset acquired on or after January 1, 2026, in an account for which the broker provides custodial services and held in that same account until disposition. For covered assets, brokers must report acquisition date, cost basis, and gain or loss type (short- or long-term).

Noncovered digital asset: Any digital asset acquired before January 1, 2026, transferred into a broker account, or otherwise failing the covered criteria. Brokers may check box 9 to designate noncovered status. When box 9 is checked, brokers are not required to complete boxes 1d, 1g, 1h, 1i, or 6, nor to check box 2, though they may voluntarily do so with penalty protection.

For 2025 transactions, all digital assets are noncovered, so only gross proceeds and disposition date are required. Beginning in 2026, cost basis and acquisition-date reporting become mandatory for covered assets, while optional for noncovered assets.

Optional reporting methods

Brokers may use optional reporting methods for certain digital asset categories. When using an optional method, brokers may aggregate sales and omit basis and acquisition-date data, even for assets that otherwise qualify as covered.

Qualifying stablecoins: Brokers may report all designated sales of each qualifying stablecoin on a single Form 1099-DA (one form per stablecoin). When this method is used, boxes 1d, 1e, 1g, 1h, 1i, 2, 3a, 3b, 5, 6, 8, 9, 12a, and 12b may be left blank, and the total proceeds for all sales of that stablecoin are reported in box 1f.

Specified NFTs: Brokers may aggregate a customer’s specified NFT sales on a single Form 1099-DA, except that first sales by a creator or minter and subsequent sales must be reported on separate forms. Under this method, the same boxes listed above may be left blank; non-first sale proceeds are reported in box 1f, while first sale proceeds are reported in box 11c.

Transactions not subject to Form 1099-DA reporting

Some transactions that may still create taxable events for customers fall outside broker reporting requirements. Examples include:

• Stablecoin sales or exchanges that qualify for the IRS’s limited-scope exemption (for example, designated sales ≤ $10,000 per customer or stablecoin-to-non-stablecoin digital asset exchanges).
• Specified NFT sales where the customer’s total annual proceeds do not exceed $600.
• Lending, staking, and wrapping transactions currently excluded under IRS Notice 2024-57 pending future guidance.
• Direct payments for goods or services in digital assets, where the broker records a withdrawal, not a sale.

Brokers should maintain appropriate records for these transactions to support customer-level tax compliance, even though Form 1099-DA is not required.

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Documentation and cost basis tracking challenges

Beyond implementing new transaction reporting systems, two of the most significant operational challenges for digital asset brokers under the Form 1099-DA framework are obtaining valid taxpayer documentation and maintaining accurate cost basis and acquisition data for digital assets held in custody.

Customer tax documentation

A key part of 1099-DA readiness is ensuring every account is properly documented for tax purposes. Brokers must be able to identify whether each customer is a U.S. or non-U.S. person, collect certified taxpayer information, and maintain that documentation on an ongoing basis.

• New customers (onboarded on or after January 1, 2026): Certified TINs should be collected at account opening using Form W-9 for U.S. persons. For non-U.S. persons, a valid Form W-8 (for example, W-8BEN or W-8BEN-E) should be collected to document foreign status and treat the account as an exempt foreign person. This ensures new customers are properly classified for reporting.
• Preexisting customers (accounts opened before 2026): Brokers are expected to remediate missing or invalid taxpayer information as part of their compliance preparation. Under Notice 2024-56, as extended by Notice 2025-33, brokers may rely on the IRS TIN Matching Program instead of obtaining a new Form W-9 for preexisting customers, provided the customer’s name and TIN combination matches IRS records. For accounts not previously classified as U.S. persons, brokers may also rely on a non-U.S. residence address already on file to treat the customer as an exempt foreign person. This transitional relief applies to digital asset sales effected during 2026 and 2027, for preexisting customers, giving brokers additional time to update account documentation before full enforcement begins.

The IRS also extended backup withholding relief for digital asset sales: no backup withholding is required for 2025 and 2026 (Notice 2024-56, extended by Notice 2025-33).

Cost basis tracking and data continuity

Accurate cost basis tracking remains one of the largest data challenges. As discussed earlier, basis and acquisition reporting are required only for covered assets, those acquired on or after January 1, 2026, and held continuously in the same custodial account.

Even for noncovered assets, however, brokers need mechanisms to determine the appropriate lot disposition ordering for sales. Without verified acquisition data, a transferred-in asset’s receipt date becomes its default acquisition date, which directly affects FIFO or LIFO gain/loss calculations and may cause downstream reporting variances.

To mitigate these issues, brokers are developing workflows that allow customers to submit Customer-Provided Information (CPI), verified acquisition details from other custodians or wallets, to fill missing data gaps. CoinTracker offers one such embedded solution that enables customers to securely share cost basis and holding-period data directly with their brokers. Integrating CPI helps reconstruct transfer histories, improve accuracy for both covered and noncovered assets, and reduce errors during 1099-DA form generation.

Penalties for non-compliance

While the IRS has granted transitional relief for initial 1099-DA reporting, brokers should still understand the potential penalties once full enforcement begins. The main consequences fall under the same framework that applies to traditional securities brokers.

Information return penalties (§§ 6721 and 6722)

Brokers that fail to file accurate and timely Forms 1099-DA with the IRS or fail to furnish correct copies to customers can face penalties of up to $340 per form, capped annually in the millions, depending on total volume. Penalties apply to late, incomplete, or incorrect filings, including incorrect TINs or transaction data. The IRS may abate these penalties if the broker demonstrates the failure was due to reasonable cause and not willful neglect.

Backup withholding liability (§§ 3406 and 3403)

Once backup withholding takes effect, brokers are directly liable for any tax they fail to withhold and remit when required. Relief under Notices 2024-56 and 2025-33 temporarily defers these obligations (fully for 2025 and 2026 and partially for 2027) to allow brokers time to build and test withholding systems and ensure Form 945 reporting is operational.

Failure-to-deposit and late-payment penalties (§§ 6651 and 6656)

Brokers that fail to withhold, deposit, or pay required tax amounts on time may be subject to civil penalties under §§ 6651 and 6656, unless the failure is due to reasonable cause and not willful neglect.

5 operational steps to achieve compliance

As the first 1099-DA reporting year approaches, digital asset brokers face both technical and procedural shifts in how they collect, track, and report customer transaction data. The following steps outline the key areas most brokers will need to address to establish compliant information reporting systems.

1. Upgrade customer onboarding procedures

Beginning January 1, 2026, brokers must collect certified taxpayer information for all new accounts, including Form W-9 for U.S. persons and W-8 forms for foreign customers. Onboarding workflows should be updated to capture and validate this information at account creation. For preexisting customers, remediation programs will be essential to identify and correct missing or invalid TINs before backup withholding applies in future years.

2. Develop a robust cost basis engine

Accurate basis tracking is the foundation of 1099-DA reporting. Brokers will need an integrated cost basis engine capable of reconciling acquisition dates, basis, and holding periods for covered assets, while flagging noncovered transfers for manual or CPI supplementation. This system must also handle events such as internal transfers, forks, and asset conversions to ensure downstream reporting accuracy.

3. Integrate with tax technology partners

Many brokers are partnering with specialized tax software providers to accelerate readiness. CoinTracker, for example, provides both a full cost basis engine and embedded tools that allow customers to securely share verified acquisition data (CPI) from external wallets and exchanges. These integrations help brokers reconcile noncovered transfers, fill data gaps, and deliver complete and accurate 1099-DA reporting without building the infrastructure from scratch.

4. Implement compliant reporting and reconciliation systems

Brokers will file Form 1099-DA through the IRS Information Returns Intake System (IRIS), similar to how traditional Form 1099 filings are transmitted. Before filing, systems must reconcile customer-level data across internal ledgers to ensure gross proceeds and basis align with realized transactions. Audit-ready reporting controls, such as versioning and exception management, are critical to reduce filing errors and penalty exposure.

5. Strengthen data retention and audit readiness

The IRS expects brokers to maintain detailed transaction records supporting each 1099-DA for at least three years after filing. Building complete, traceable data histories will allow brokers to respond to IRS inquiries and support customer corrections efficiently. While noncovered assets don’t require basis reporting, retaining this information improves downstream accuracy once assets become covered in future years.

Stay tax compliant with CoinTracker

Form 1099-DA has ushered in a new era of transparency for digital assets in the U.S. Crypto platforms and digital asset brokers must now work to remain in compliance with the IRS so they – and their users – accurately report all taxable dispositions to U.S. tax authorities. By investing in robust systems, partnering with tax software providers like CoinTracker, and building comprehensive audit trails, these crypto platforms will be able to deftly navigate an evolving regulatory landscape.

CoinTracker makes tracking crypto and preparing for tax season easier. Bring everything into one dashboard with automatic tracking of over 50,000 cryptocurrencies and integration with all of the top exchanges. Sign up for free and start your crypto journey with CoinTracker. 

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.

FAQ

Do crypto exchanges need to file Form 1099-DA?

Yes. Starting with transactions effected in 2025 (reported in 2026), U.S. digital asset brokers, including custodial centralized exchanges, must file Form 1099-DA to report gross proceeds from customer sales and dispositions of digital assets. One copy is furnished to the IRS and another to the customer. Reporting of cost basis becomes mandatory for covered digital assets acquired on or after January 1, 2026.

Are NFT marketplaces required to file Form 1099-DA?

Most NFT marketplaces operate as non-custodial platforms, meaning they never hold or control users’ digital assets. Under the current regulations, these decentralized or non-custodial NFT marketplaces are not classified as brokers and therefore are not required to file Form 1099-DA. Only marketplaces that custody or control digital assets on behalf of customers and facilitate sales would fall within the broker definition. 

How should U.S. crypto exchanges prepare for IRS crypto compliance?

Brokers should update their customer onboarding workflows to collect certified taxpayer documentation, including Forms W-9 and W-8. They should also implement or integrate a cost basis engine to track acquisition data, cost basis, and holding-period information for covered assets, and establish internal reconciliation and audit controls to support accurate electronic filing through the IRS Information Returns Intake System (IRIS). Many brokers are also partnering with specialized tax-technology providers to automate data aggregation and incorporate customer-provided information for noncovered assets, ensuring a more complete and compliant reporting process.