As Form 1099-DA requirements phase in, the broker-reported information the IRS receives about certain digital asset sales and exchanges will expand. For investors, reconciliation will matter more. The IRS may have additional third-party information about a sale or exchange, but not the full history needed to determine gain or loss. Investors remain responsible for reconciling broker-reported proceeds with basis, holding period, transaction costs, and other relevant facts.
That can be difficult because digital assets often do not stay in one place. An investor may buy an asset on one exchange, move it to a self-custodied wallet, use it in staking or decentralized finance (DeFi) activity, bridge it to another network, and later sell it through a different platform. In that situation, the selling broker may know the sale proceeds, but not the investor’s full acquisition history.
That is where the new reporting regime creates a reconciliation challenge. The form may report proceeds, and some exchanges and brokers may provide basis information, but the investor may still need separate records to support holding period, wallet history, transfer history, transaction costs, and basis calculations.
This new reconciliation challenge is the practical result of a broader statutory change. The Infrastructure Investment and Jobs Act of 2021 (IIJA) amended the broker information-reporting rules under Internal Revenue Code Section 6045 to cover certain digital asset sale and exchange transactions. The IIJA did not create broker reporting from scratch. Section 6045 already applied to securities and other financial transactions, but the pre-IIJA broker-reporting framework was developed long before modern digital assets existed. Congress, through the IIJA, brought certain digital asset broker transactions expressly into the information-reporting system.
The U.S. Department of the Treasury and the IRS have now implemented that statutory change through final regulations and Form 1099-DA, Digital Asset Proceeds From Broker Transactions. For investors, however, receiving the form is only the beginning. The more important question is whether the investor can connect it to wallet histories, exchange records, transfer activity, and supportable basis calculations.
Why Form 1099-DA Changes the Practical Environment
Information reporting matters because it gives the IRS third-party data to compare against taxpayer returns. When Form 1099-DA reporting is required, broker-reported information is furnished to investors and filed with the IRS. Public IRS materials describe information-return matching as a core compliance tool, and IRS tax-gap materials have long observed that voluntary compliance is higher when income is subject to third-party reporting.
For digital asset investors, increased IRS visibility makes reconciliation more important. A broker form may report proceeds, and in some cases basis, but it may not show all of the facts reflected on the return. For example, the form may report proceeds without complete basis, acquisition-date, holding-period, transfer-history, or transaction-cost information. That does not mean the return is wrong; it means the investor should be prepared to explain and support how the reported sale connects to the gain or loss reported on the return.
Digital asset reporting can be complicated, especially where assets move through self-custody, multiple platforms, staking, rewards, DeFi activity, or non-fungible tokens (NFTs). Once broker-reported information is filed with the IRS, discrepancies or gaps are more likely to require explanation.
The practical question is whether the investor can connect the broker form, the investor’s own records, and the gain or loss reported on the tax return.
Proceeds Reporting: The First Step
For tax year 2025, proceeds reporting is the starting point for Form 1099-DA. Brokers generally must report certain digital asset sale and exchange transactions occurring on or after January 1, 2025. In many cases, investors have already received a form showing what they received from a digital asset sale or exchange.
Some exchanges and brokers are also providing basis information, whether on Form 1099-DA, on related statements, or through account-level tax reporting tools. That information can be useful, but investors should not assume it is complete in every case, particularly where assets were acquired elsewhere, transferred between platforms, moved through self-custody, or affected by activity outside the broker’s records.
That distinction matters because a proceeds number alone does not determine taxable gain or loss, and broker-provided basis should be reviewed against the investor’s records. For example, a Form 1099-DA may report that an investor received $100,000 from the sale of a digital asset. To determine taxable gain or loss, the investor still needs to confirm basis, acquisition date, holding period, transaction costs, transfer history, and other relevant facts.
Basis Reporting: The Next Phase
For sales effected after 2025, brokers must continue reporting gross proceeds for digital assets. They also generally must report basis information for digital assets treated as covered securities. For noncovered digital assets, basis reporting generally remains voluntary.
That covered/noncovered distinction will be important because not every Form 1099-DA will include complete basis information. Some forms may include broker-reported basis, while others may report proceeds only. Even where basis is reported, its completeness will depend on what the broker knows about the asset’s acquisition history.
Basis reporting should be more straightforward when an investor acquired and sold the asset on the same platform after the relevant effective date. But if the asset was acquired elsewhere, moved through self-custody, transferred between exchanges, held from an earlier period, or received through another type of transaction, the selling broker may not have complete basis information.
The Basis-Gap Problem
Many digital asset investors have not held assets in a single account from acquisition through sale. That can create a basis gap: the selling broker may know the sale proceeds, but not the investor’s full acquisition history.
Consider an investor who purchased ether (ETH) on Exchange A, transferred it to a self-custodied wallet, and later moved it to Exchange B for sale. Exchange B may know the sale price, but it may not know the investor’s original cost, acquisition date, fees, or holding period. The investor may receive a Form 1099-DA showing proceeds, while still needing records to support basis.
The same issue can arise with older holdings, transfers from unsupported platforms, wallets with incomplete histories, staking income, rewards, airdrops, DeFi transactions, NFTs, and assets acquired before the investor had a consistent record-keeping system.
A basis gap does not necessarily mean the investor’s return position is wrong. It means the investor needs records and a supportable methodology for connecting the reported sale to the original acquisition history.
Key investor takeaway: A Form 1099-DA may report the sale, but the investor still needs to support the tax result. For investors with transfers, self-custody, older holdings, staking, DeFi activity, NFTs, or multiple platforms, the key question is whether they can connect reported proceeds to reliable basis, holding-period, and transfer-history records.
Where Investors Are Most Likely to See Issues
Basis and reconciliation issues are most likely to arise where investors have:
- High transaction volume across multiple exchanges or platforms;
- Transfers from self-custody to a broker before sale;
- Older holdings acquired before current reporting systems were in place;
- Incomplete exchange histories, missing CSV files, or inaccessible legacy accounts;
- Staking, rewards, airdrops, hard forks, or other income events affecting tax history;
- DeFi, bridging, wrapping, lending, liquidity-pool, protocol-migration, or NFT activity;
- Manually adjusted spreadsheets or crypto tax software outputs that do not match broker-reported information; or
- Large transactions where proceeds-only reporting could create an apparent mismatch.
A Practical Basis-Readiness Checklist
Investors with significant or complex digital asset activity should treat basis reporting as a wallet-by-wallet, platform-by-platform record-readiness issue, not just a tax-form issue. Before the next reporting cycle, investors may want to consider whether they can:
- Download complete transaction histories from every exchange or platform used;
- Preserve wallet records, transaction hashes, and transfer histories;
- Identify assets transferred from self-custody, another exchange, or another platform where the selling broker may not have complete basis information;
- Review older holdings for missing acquisition dates, purchase prices, fees, and holding-period information;
- Identify transactions where Form 1099-DA reports proceeds but does not report basis;
- Compare Form 1099-DA information to Form 8949 and Schedule D reporting positions;
- Document assumptions and methodologies used to calculate basis, especially where records are incomplete;
- Review large transactions, proceeds-only transactions, and expected discrepancies before filing; and
- Retain support for any differences between broker-reported information and the tax return position.
The Controversy-Avoidance Point
Investors should not simply accept every number on a form if the form does not reflect the full transaction history. A broker may not have complete basis information, especially for transferred or noncovered assets.
Investors should be prepared to support their return positions with records, explanations, and a reasonable methodology. This is especially important where a broker form captures the final sale but not the transfers, wallet movements, staking events, or platform history that preceded it.
The goal is to avoid a situation where the tax return tells one story, the broker form tells another, and the investor’s records cannot bridge the gap. The earlier investors identify missing basis records, incomplete transfer histories, or inconsistent platform data, the easier it may be to reconstruct support while records remain available.
Bottom Line
The IIJA marked a turning point in digital asset tax administration by moving certain digital asset transactions into the broker information-reporting framework used for traditional financial assets.
Proceeds reporting is the first step. Basis reporting is the next challenge.
The takeaway is straightforward: Form 1099-DA may provide useful information, but it will not always provide a complete tax answer. Investors should focus now on basis support, wallet-by-wallet tracking, transfer documentation, and reconciliation.
That review is especially important for investors with significant transaction volume, self-custody transfers, older holdings, missing acquisition records, DeFi activity, staking or rewards income, NFTs, or expected basis gaps.
If you have questions about digital asset basis reporting, Form 1099-DA reconciliation, missing basis records, self-custody transfers, or documentation strategies, please reach out to a professional at Forvis Mazars.
*Disclaimer: This advisory is provided for educational and informational purposes only and is not intended to, and should not, be construed as financial, legal, or tax advice. Readers should consult their tax advisors regarding their specific facts and circumstances.