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Starting in 2025, crypto exchanges report your transactions directly to the IRS through Form 1099-DA. If you are wondering about 1099-da crypto form explained, the short answer is: the IRS now knows what you traded.
What Exchanges Report
For tax year 2025, exchanges must report gross proceeds from all digital asset sales. Starting with 2026 transactions, they must also report cost basis for covered assets acquired and held within the same exchange. This means the IRS will have both sides of the equation - what you sold for and what you paid - for many transactions.
The Cost Basis Gap
Here is the problem: for 2025, exchanges report proceeds but not cost basis. This means the IRS sees $100,000 in sales but does not know you paid $90,000 for those assets. Without cost basis reporting, the IRS might assume your entire proceeds are profit. It is your responsibility to provide the cost basis on your tax return.
Multiple Exchange Issues
If you traded on multiple exchanges and transferred crypto between them, no single exchange has your complete picture. Exchange A knows you bought Bitcoin for $30,000. Exchange B knows you sold Bitcoin for $60,000. Neither knows the other exists. The IRS receives reports from both and may not connect them, creating apparent discrepancies.
What to Do
Keep complete records of all transactions across all exchanges. Match your filed return against every 1099-DA you receive. If there are discrepancies, address them proactively before the IRS sends a notice. If you have already received a notice, contact a crypto tax attorney.