If you recently received Form 1099-DA as a result of your crypto or digital asset transactions made in 2025, you might have noticed a few problems. One of the most notable is that the cost basis information reported on this form is incorrect. It might be blank, show “$0.00,” state an “unknown” value, or contain an amount that’s flat out wrong.
Before you panic and assume the IRS thinks you have overstated taxable income, understand that this is a common issue. There are things you can do to provide this missing information and avoid paying taxes on capital gains you didn’t actually earn.
However, the sooner you act, the easier it will be to fix. If you have questions, a crypto tax attorney from Seattle Legal Services, PLLC can help.
Key Takeaways
- Form 1099-DA – This is a tax document digital asset brokers create to report potentially taxable income generated from the sale of digital assets, such as cryptocurrency.
- Missing basis information – For 2025 transactions, brokers aren’t required to include cost basis information on 1099-DAs, yet this information is important to determine how much of the proceeds from a digital asset transfer is taxable.
- Calculating cost basis – Taxpayers must refer back to transaction histories or apply special rules for calculating the cost basis of digital assets reflected on 1099-DAs.
- Correcting prior tax returns – If an incorrect 1099-DA has already been used to file a tax return, the taxpayer should file a superseding or amended return.
- Consider professional tax advice – For complex transactions, incomplete records, or large discrepancies, it may be a good idea to talk to an experienced crypto tax attorney for advice on how to proceed.
What Is Form 1099-DA?
IRS Form 1099-DA, Digital Asset Proceeds from Broker Transactions, is an informational tax document that the IRS requires digital asset brokers to provide. Its purpose is to report digital asset transactions that could result in taxable income.
A digital asset is electronically stored property that’s recorded on a cryptographically secured, distributed ledger or similar technology. The IRS treats digital assets as property for tax purposes, and common examples include NFTs and cryptocurrencies.
If you sold more than $600 in digital assets, then you likely received this form. This reporting requirement hasn’t been in effect for very long, which might explain why you’re only now receiving 1099-DA even if you’ve traded in digital assets for years. Specifically, the 1099-DA crypto reporting requirement only applies to digital asset transactions made on or after January 1, 2025.
Why Your 1099-DA Might Be Wrong
The problem you might be having is that the cost basis is missing or incorrect. This is a common problem for many digital asset traders and investors because of how digital assets work.
With traditional securities, like stocks, there’s a single market or intermediary to keep track of an asset’s history. For example, imagine you bought 100 shares of stock off the New York Stock Exchange (NYSE) on March 1, 2025, for $50.00 a share with Brokerage A. Then, sometime in the future, you sell those 100 shares with Brokerage B.
Despite buying the 100 shares with Brokerage A and selling them with Brokerage B, the transaction history of this stock only exists on the NYSE. For many digital assets, it isn’t this easy to track transaction history.
For instance, cryptocurrency can move between exchanges, wallets, and decentralized platforms. When these transfers occur, it can be difficult for the most recent brokerage holding the asset to know the original price paid for that asset (aka its basis).
This means if you sold one Bitcoin on Coinbase for $85,000 in 2025, but you received that one Bitcoin from your employer as an end-of-year bonus in 2023 (when it was valued at $20,000), Coinbase has no idea that your basis for that transaction is $20,000. Therefore, the 1099-DA Coinbase creates for that transaction may show $85,000 in potentially taxable proceeds even though there was only a $65,000 capital gain.
So the IRS sees proceeds from your NFT, crypto, or other digital asset sales, but not their underlying cost. Unfortunately, the burden is on you to provide this missing information.
Hopefully, things will get better in the future, as brokers will need to start including basis information on 1099-DA forms. But this requirement only applies to certain digital asset transactions that occur on or after January 1, 2026.
Why You Shouldn’t Ignore Problems With Your 1099-DA
An incorrect 1099-DA is problematic for at least two reasons:
- The IRS will think you owe taxes on income you didn’t earn.
- Mismatched information could lead to an audit.
Both of these can be costly, but the good news is that the IRS is aware of the cost basis problems with 1099-DAs from 2025. Because of this, the IRS is allowing taxpayers a bit more leeway in proving the basis for their digital asset transactions reported on Form 1099-DA.
How to Correct 1099-DA Mistakes or Missing Information
If you receive a 1099-DA and see that it contains incorrect information that’s unrelated to the cost basis for the digital asset, you should contact the exchange and ask for a corrected 1099-DA. You’ll need to explain why the 1099-DA they sent you is wrong, but it’s possible they’ll refuse to do this, deny any errors, or take a long time to provide the corrected 1099-DA form.
Despite these scenarios, you should still contact the exchange to demonstrate good-faith efforts to comply with your tax reporting obligations. This will be helpful when asking for an extension with the IRS or explaining to the IRS why the information on the 1099-DA is incorrect, and the information you’re providing is accurate.
However, most cases involving incorrect 1099-DAs from 2025 will concern missing basis information, requiring you to calculate the tax basis yourself.
Providing Correct Basis Information
If your 1099-DA has incorrect basis information about the digital asset, you’ll need to go over your digital asset transaction history to calculate the basis. How you do this depends on how you acquired the asset. If you purchased it from a digital asset broker or exchange, you should have access to the transaction history showing when you bought the asset and the price you paid.
You can then enter this correct basis amount into column (g) of IRS Form 8949, Sales and Other Dispositions of Capital Assets. Depending on how long you owned the asset, you’ll use column (g) from either Part I or Part II of Form 8949. In column (f), you’ll enter code “B,” which explains that the basis calculation provided on Form 1099-DA was incorrect.
In some cases, you won’t have the information needed to identify when and for what price you bought a particular digital asset. If this happens, you’ll need to do your best to estimate this information. This might require you to apply a default rule, such as FIFO (first in, first out). This assumes that the oldest digital asset (the one you obtain first) is the first digital asset you sold.
It’s important to note that there may be other default rules (found in IRS tax regulations) for determining how the basis of a digital asset should be calculated when there are insufficient records.
The above steps only apply if you still need to file your return. If you need more time to file, you can ask for a filing extension from the IRS. This gives you until October 15 to file your tax return. If you already filed your return and now realize it contains errors, you’ll need to take additional steps.
You Already Filed Your Tax Return
You have two options for fixing the prior filed tax return:
- File a superseding tax return: You can do this if the filing deadline hasn’t passed.
- File an amended tax return: You can do this if the filing deadline has already passed.
A superseding tax return replaces a previously filed tax return, while an amended return changes what’s already been filed. In some cases, filing a superseding tax return can offer certain benefits over an amended return.
If your need to correct a prior filed tax return stems from willful (and potentially criminal) conduct, you can also consider the Voluntary Disclosure Program (VDP). This program lets you voluntarily and proactively disclose unreported income or other tax violations before the IRS finds out. The goal of coming forward is to reduce the risk of criminal prosecution.
When trying to decide whether to file an amended or superseding return or apply for the VDP, it’s usually a good idea to talk to a tax professional. Depending on your situation, one path could prove more beneficial than other options.
Don’t Let Crypto Tax Problems Escalate
If you realize there’s a tax mistake concerning your digital assets, it’s important to act as soon as possible. Acting slowly can increase your risk of an audit or IRS enforcement actions that are more difficult to clear up.
In some cases, you can address the 1099-DA or other crypto tax mistake on your own. But if you’re dealing with missing records, large discrepancies, or complex transactions, it might be a good idea to consult with a digital asset tax lawyer, such as one from Seattle Legal Services, PLLC. We have experience resolving cryptocurrency and other tax problems relating to digital assets, including incorrect 1099-DA forms. To get started, reach out using our online contact form or by calling 425-428-5262.
1099-DA Crypto FAQs
Do I need to report digital asset transactions even if I didn’t make money?
Yes, the IRS requires you to report any digital asset dispositions (when you get rid of crypto by selling it, giving it away, or spending it), even if there’s no reportable tax gain or loss.
How do I correct errors if I’m missing transaction records?
The IRS released Notice 2025-7, which allows taxpayers to use reasonable methods for determining the cost basis for their digital assets. There may also be other IRS regulations that provide guidance on acceptable methods for calculating a digital asset’s basis.
Where do I report capital gains or losses from digital asset transactions?
You can report these gains or losses on IRS Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses. You may not need Form 8949 if your 1099-DA form contains no errors and includes basis information for the digital asset (the cost basis information on the 1099-DA is likely missing or incorrect for 2025 digital asset transactions, though).
What’s the difference between a long-term or short-term capital gain or loss?
The difference is in how long you held the asset before selling or transferring it. Digital assets held for one year or less result in short-term capital gains or losses. Digital assets held for more than one year result in long-term capital gains or losses.
Why is my Form 1099-DA missing accurate cost basis information?
The short answer is that many digital asset brokers didn’t have access to the underlying cost of the digital asset you sold or transferred through them. And if they did, they chose not to provide this basis information on the 1099-DA because they weren’t legally required to do so (cost basis information isn’t needed on a 1099-DA unless the transaction takes place on or after January 1, 2026).
Sources
– https://www.irs.gov/forms-pubs/about-form-1099-da
– https://www.irs.gov/businesses/understanding-your-form-1099-da
– https://www.irs.gov/filing/digital-assets
– https://www.irs.gov/pub/irs-pdf/i8949.pdf
– https://www.irs.gov/pub/irs-pdf/i1040sd.pdf
– https://www.irs.gov/pub/irs-drop/n-25-07.pdf
– https://www.irs.gov/filing/get-an-extension-to-file-your-tax-return