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Crypto Taxes & Form 1099-DA 2026: What to Do First

Your first Form 1099-DA shows crypto proceeds but no cost basis. Learn how to compute basis, report on Form 8949 and Schedule D, and avoid a CP2000 notice.

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This article is for educational purposes only and is not tax, legal, or financial advice. Tax rules change frequently, so always check current IRS guidance or consult a qualified tax professional before you file.

Early 2026 is the first time most crypto investors will open their mailbox (or their exchange dashboard) and find a Form 1099-DA. It looks official, it shows a big number, and for the 2025 tax year it leaves out the one figure that matters most: your cost basis.

That gap is not a glitch. The form was built this way for its first year. But if you do not handle it correctly, the IRS computer that matches forms to returns may decide you understated your income, even when you did not.

This guide walks through what the 1099-DA actually contains, how to fill in the missing basis, how to report everything on Form 8949 and Schedule D, and how to stay clear of an automated notice.

What Form 1099-DA Is, and Why You’re Getting One Now

Form 1099-DA (“Digital Asset Proceeds From Broker Transactions”) is a new information return. Custodial brokers, which means centralized exchanges that hold your crypto for you, now have to report your digital-asset sales to the IRS the same way a stock brokerage reports stock sales on Form 1099-B.

Under the IRS final regulations, brokers must report gross proceeds for digital-asset sales made on or after January 1, 2025. The first batch of forms covers your 2025 activity and was furnished in early 2026.

If you sold, swapped, or otherwise disposed of crypto on Coinbase, Kraken, or a similar platform in 2025, you should get a 1099-DA. The IRS gets an identical copy.

Keep in mind what this form is not. It is not a tax bill, and it is not the final word on what you owe. It is a starting point that you correct and complete on your own return.

The Catch: Your 2025 1099-DA Shows Proceeds, Not Cost Basis

The 2025 Form 1099-DA reports gross proceeds only. It does not report what you paid for the crypto, and that trips up a lot of people.

Cost basis reporting is not required for 2025. Under the IRS instructions, basis reporting becomes mandatory for “covered” digital assets only for transactions on or after January 1, 2026, with those basis-bearing forms arriving in early 2027.

The timing matters because your taxable gain is proceeds minus basis. If the form shows $40,000 in proceeds and nothing else, the raw number implies a $40,000 gain. If you actually paid $38,000 for that crypto, your real gain is $2,000. Read literally by a computer, the form overstates your gain by $38,000.

You will also see the terms “covered” and “noncovered.” A covered digital asset is one acquired on or after January 1, 2026 inside a custodial broker account, where the broker tracks and reports your basis. A noncovered asset is one acquired before that date, or transferred in from an outside wallet, where the broker reports proceeds but not basis. For the 2025 form, treat everything as basis-not-reported and supply the basis yourself.

How to Compute Your Own Cost Basis (and the Per-Wallet Rule)

Cost basis is simple in concept: it is what you paid to acquire the asset, plus any acquisition fees. If you bought 1 ETH for $1,800 and paid a $20 fee, your basis is $1,820.

The complication is which units you sold when you own many lots bought at different prices. Within a single account you generally choose between FIFO (first in, first out) and specific identification, where you name the exact lot you are selling.

Then there is a rule change that quietly reshaped crypto basis tracking. Revenue Procedure 2024-28 ended the old “universal” or pooled method, where you could treat all of your crypto as one big bucket of basis across every wallet and exchange.

As of January 1, 2025, you must track basis per wallet and per account. Each wallet stands on its own. Rev. Proc. 2024-28 included a safe harbor that let taxpayers allocate any unused basis to specific wallets as of that switchover date, so you start 2025 with a clean per-account ledger.

In practice that means you cannot pull basis from your hardware wallet to offset a sale on an exchange. The basis has to live in the same account as the units you sold. Good recordkeeping (acquisition dates, amounts, fees, and which wallet held what) is now the difference between an accurate return and a guess.

Reporting Crypto on Form 8949 and Schedule D

Crypto gains and losses flow through the same forms as stock sales: Form 8949 first, then Schedule D, then onto your Form 1040.

Form 8949 sorts transactions into boxes based on holding period and whether the IRS already received the information. For crypto reported on a 1099-DA where proceeds were sent to the IRS but basis was not, you use the “proceeds reported, basis not reported” box: Box B for short-term holdings (held one year or less) and Box E for long-term holdings (held more than a year).

This is where you fix the overstated gain. You enter the proceeds the broker reported, then enter your own basis. If the broker reported no basis, you use the adjustment columns (columns (f) and (g)) with the appropriate code to bring the basis to the correct figure so your gain reflects reality rather than the raw proceeds.

Transactions with no 1099-DA at all (self-custody sales, peer-to-peer trades, DeFi activity) go in the box for transactions not reported to the IRS. You still report them. The absence of a form does not erase the tax.

Once Form 8949 is complete, the totals roll up to Schedule D, which separates short-term gains (taxed at ordinary income rates) from long-term gains (taxed at the lower capital-gains rates). Schedule D then feeds your 1040.

Do not forget the digital-asset question at the top of Form 1040. Check “Yes” if you sold, swapped, spent, or received crypto during the year. Check “No” only if you bought with cash and simply held.

The CP2000 Trap: Avoiding an Automated IRS Notice

The IRS runs an automated document-matching program. It compares the income figures on your return against every 1099 and W-2 it received from third parties. When they do not line up, it generates a CP2000 underreporter notice, often a year or more after you file.

A basis-less 1099-DA is a perfect setup for this. The IRS has a copy showing large proceeds. If your return does not clearly account for those proceeds with the correct basis, the system can read the difference as unreported gain and send a notice proposing extra tax, penalties, and interest.

To avoid it, report every transaction the 1099-DA covers, match the proceeds figure exactly, and supply your basis through Form 8949 so the gain is correct. When the numbers reconcile, the matching program has nothing to flag.

Watch the edges, too. The 1099-DA does not cover self-custody, DeFi swaps, peer-to-peer transfers, or staking and mining rewards (which are ordinary income when received). Leaving those off does not make them invisible, and it can create the opposite mismatch where the IRS later finds income you omitted.

There is one piece of relief for this transition year. The IRS has said it will not impose penalties on brokers for 2025 filing failures where the broker made a good-faith effort to comply. That covers the brokers, not you, and several major exchanges reported real delays getting forms out in early 2026 (some not available until mid-March or later). If your form is late, you still need to file an accurate return from your own records.

Fold Your Crypto Gains Into Your Full 2026 Refund Estimate

Crypto capital gains do not sit in a corner by themselves. They add to your total taxable income, which can nudge your marginal rate, change how much of your gain qualifies for the lower long-term rate, and even affect credits that phase out at higher income.

So looking at an isolated “crypto gain” number can mislead you. A $5,000 long-term gain hits very differently for a filer near the top of the 12% bracket than for one already in the 32% bracket. You only see the real effect when the gain is part of your whole return.

Most crypto tax guides skip this part. Tax47 is built to assemble the full picture: you add your crypto proceeds and basis alongside your W-2, 1099, and Schedule C data, and the estimated refund or balance due updates live with the gains included. Every eligible credit, deduction, self-employment tax, and the 2026 One Big Beautiful Bill changes are applied automatically, and the calculation runs on your device.

If you want to sketch the numbers before committing, the tax tools can help you see where a capital gain lands in your bracket, and the 2026 federal tax brackets guide breaks down the rates your gains run through. When you are ready to run a full estimate, you can download the app.

Frequently Asked Questions

What is Form 1099-DA and who sends it?

Form 1099-DA is a new IRS form that custodial brokers and centralized exchanges use to report digital-asset sale proceeds. It was first issued in early 2026 for 2025 transactions. If you sold or swapped crypto on a platform like Coinbase or Kraken in 2025, you should receive one.

Why is cost basis missing from my 1099-DA?

Basis reporting is not required for the 2025 form. It begins with 2026 covered transactions, and the first basis-bearing forms arrive in early 2027. For now, the form shows gross proceeds only, so you must supply your own cost basis when you file.

Do I still have to report crypto if I didn’t get a 1099-DA?

Yes. All taxable disposals go on Form 8949 and Schedule D regardless of whether a form was issued. Self-custody sales, DeFi swaps, staking, and mining income do not appear on a 1099-DA, but you still have to report them.

Which Form 8949 box do I use for crypto with a 1099-DA?

Use the box for transactions where proceeds were reported to the IRS but basis was not: Box B for short-term holdings and Box E for long-term holdings. Then use the adjustment columns to correct the basis so your gain is accurate.

What is Rev. Proc. 2024-28 and per-wallet cost basis tracking?

Rev. Proc. 2024-28 is IRS guidance that ended universal or pooled cost-basis methods. From January 1, 2025 you must track basis per wallet or per account, with a safe harbor that let you allocate any unused basis to each wallet as of that date.

What is a CP2000 notice and how does a 1099-DA trigger one?

A CP2000 is an automated underreporter notice the IRS sends when your return does not match the forms it received. A basis-less 1099-DA reports a large proceeds figure with no offsetting basis, which can make your gains look overstated and flag a mismatch if you do not report the basis yourself.

How do I calculate cost basis for crypto?

Cost basis is your original acquisition price plus any fees, tracked per wallet or account. Within each account you generally use FIFO or specific identification to decide which units you sold.

Do I check Yes on the Form 1040 digital asset question?

Check Yes if you sold, swapped, spent, or received crypto during the year. Check No if you only bought crypto with cash and held it without disposing of any.

Sources & References

Frequently Asked Questions

What is Form 1099-DA and who sends it?

Form 1099-DA is a new IRS form that custodial brokers and centralized exchanges use to report digital-asset sale proceeds. It was first issued in early 2026 for 2025 transactions. If you sold or swapped crypto on a platform like Coinbase or Kraken in 2025, you should receive one.

Why is cost basis missing from my 1099-DA?

Basis reporting is not required for the 2025 form. It begins with 2026 covered transactions, and the first basis-bearing forms arrive in early 2027. For now, the form shows gross proceeds only, so you must supply your own cost basis when you file.

Do I still have to report crypto if I didn't get a 1099-DA?

Yes. All taxable disposals go on Form 8949 and Schedule D regardless of whether a form was issued. Self-custody sales, DeFi swaps, staking, and mining income do not appear on a 1099-DA, but you still have to report them.

Which Form 8949 box do I use for crypto with a 1099-DA?

Use the box for transactions where proceeds were reported to the IRS but basis was not: Box B for short-term holdings and Box E for long-term holdings. Then use the adjustment columns to correct the basis so your gain is accurate.

What is Rev. Proc. 2024-28 and per-wallet cost basis tracking?

Rev. Proc. 2024-28 is IRS guidance that ended universal or pooled cost-basis methods. From January 1, 2025 you must track basis per wallet or per account, with a safe harbor that let you allocate any unused basis to each wallet as of that date.

What is a CP2000 notice and how does a 1099-DA trigger one?

A CP2000 is an automated underreporter notice the IRS sends when your return does not match the forms it received. A basis-less 1099-DA reports a large proceeds figure with no offsetting basis, which can make your gains look overstated and flag a mismatch if you do not report the basis yourself.

How do I calculate cost basis for crypto?

Cost basis is your original acquisition price plus any fees, tracked per wallet or account. Within each account you generally use FIFO or specific identification to decide which units you sold.

Do I check Yes on the Form 1040 digital asset question?

Check Yes if you sold, swapped, spent, or received crypto during the year. Check No if you only bought crypto with cash and held it without disposing of any.