Cryptocurrency, or “crypto” as it’s often called, has transformed the financial landscape. Crypto is a digital currency, meaning it runs on a virtual network and does not exist in physical form like cash or coins. Bitcoin is an example of cryptocurrency. While crypto has opened up opportunities in the financial landscape, it has also created complexities and problems, especially when it comes to taxes and tax reporting. The Internal Revenue Service (IRS) launched Form 1099-DA in the 2025 tax year, which is designed for reporting cryptocurrency. Let’s look at the specifics of crypto tax reporting and Form 1099-DA.
How is Cryptocurrency Taxed?
To answer many people’s first question: you do need to pay tax on cryptocurrency earned. However, it’s a slightly different process than simple income tax. The IRS treats cryptocurrency as property, not currency. This means that if you sell crypto for legal tender (i.e., U.S. dollars), you must pay tax on that sale. Trading one crypto for another is also taxable. Additionally, using crypto to pay for goods or services triggers capital gains or losses, and earning crypto is considered income. This means that all of these actions must be reported on your tax return.
What Is IRS Form 1099-DA?
In tax year 20205, the IRS introduced Form 1099-DA (Digital Asset Proceeds From Broker Transactions) to improve transparency and compliance in crypto reporting. In the past, crypto tax reporting has been inconsistent. Many investors were unaware that crypto trades could trigger taxable events. The form is very similar to Form 1099-B that traditional brokers use to report stock transactions. The purpose of Form 1099-DA is for taxpayers to report digital asset transactions and helps reduce underreporting and confusion around crypto taxes.
You may receive Form 1099-DA if you participate in cryptocurrency exchanges, which includes broker platforms, some payment processors and custodial wallets. The IRS considers these entities as “brokers” under the new rules. As such, they will be required to report crypto transaction activity directly to the IRS and provide you with a copy.
Form 1099-DA asks for the date of each transaction, type of transaction (buy, sell, exchange), gross proceeds, cost basis, and gain or loss calculations. Because crypto is considered property by the IRS, it’s subject to capital gains and losses. As such, this information helps taxpayers accurately report those capital gains and losses on their tax returns.
Consider taking the following steps to help you accurately complete and file Form 1099-DA. First, keep detailed records of your transactions. That includes noting the purchase price, sale price, dates of transaction and any fees associated with it. Second, using crypto tax software and calculators can help consolidate crypto transactions across multiple platforms and provide you with more accurate reports and records. You may also want to compare your 1099-DA forms with your own records to ensure they are accurate and match before filing your taxes.
Crypto tax rules can be complex and still evolving. Form 1099-DA only came into existence in 2025. As with all tax matters, I highly recommend you always consult with an experienced tax professional or tax attorney to help you navigate crypto tax reporting. You don’t want to make a mistake and end up being audited by the IRS. It’s better to have a tax professional review your Form 1099-DA than be left owing taxes.
Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego.
