Expanded crypto tax reporting rules are creating a gap that no single broker form will close: the IRS will receive sale proceeds from custodial platforms while taxpayers remain responsible for stitching together the acquisition history that turns those proceeds into a defensible return.
Where Form 1099-DA Falls Short
The 1099-DA obligation originates from changes to Internal Revenue Code section 6045 enacted by the Infrastructure Investment and Jobs Act, implemented through Treasury Decision 10000, published 9 July 2024, and applying to sales on or after 1 January 2025. The IRS finalised the form itself on 10 January 2025, with brokers beginning to file and distribute copies in early 2026.
For 2025, the form reports gross proceeds only. Cost-basis reporting phases in later, and only for a narrow class of assets. Under the covered-security definition, mandatory basis reporting applies solely to digital assets acquired on or after 1 January 2026 and held continuously in the same broker’s custodial account until disposition. Anything transferred in from elsewhere is noncovered; for noncovered assets, basis reporting by the broker remains voluntary.
The result is a predictable mismatch. The IRS sees the sale amount. The taxpayer holds the purchase history. The return has to reconcile the two, and if missing basis is treated as zero, taxable gain is overstated. Gross proceeds are not profit, and a trader cycling the same capital repeatedly can generate proceeds multiples above their initial deposit while the true taxable result is proceeds minus supported basis.
Wallet-by-Wallet Basis Tracking Is No Longer Optional
Final regulations moved taxpayers to per-wallet or per-account basis identification beginning in 2025. Revenue Procedure 2024-28 provided a safe harbour for allocating previously unattached basis to specific wallets or accounts as of 1 January 2025. Aprio’s analysis of the procedure identifies two permitted methods: Specific Unit Allocation, which assigns identified units of unused basis to remaining digital asset units within each wallet; and Global Allocation, which applies a predefined ordering rule to distribute unused basis across pools of remaining assets.
The safe harbour has hard exclusions: digital assets acquired or transferred on or after 1 January 2025 are outside its scope, as is any basis amount that was under audit, litigation, or IRS review as of that date unless the issue was resolved beforehand.
Practitioners advising clients ahead of the deadline, as reported by Thomson Reuters, recommended consolidating unused basis into as few wallets as possible before 31 December 2024 to reduce the administrative burden of the global allocation method. Duane Morris LLP outlined four pre-deadline options: move all assets into one account; use crypto tax software to allocate unused basis; sell all holdings by 31 December and repurchase after 1 January if desired; or elect the safe harbour under Rev. Proc. 2024-28.
Crypto Tax Reporting Rules and the Staking Complication
Revenue Ruling 2023-14 treats staking rewards as ordinary income when a cash-method taxpayer has dominion and control over them. BDO’s analysis confirms this applies whether the taxpayer stakes directly to a proof-of-stake network or receives additional tokens through an exchange’s staking product. A Tax Court has since confirmed that staking rewards are taxable upon receipt, consistent with the ruling.
The recordkeeping consequence is direct: the fair market value used to measure income at receipt also sets the cost basis for a later disposition. If that receipt value is absent from the data set, the capital gain calculation on exit is wrong even when the sale proceeds figure is accurate.
The Reconciliation Problem Across DeFi and Multi-Chain Portfolios
A block explorer shows contract calls, token movements, and transaction hashes. It does not classify each event for a federal return. A single DeFi interaction can produce deposit records, receipt tokens, reward tokens, and fees in one transaction. Whether any of those events constitutes a taxable disposition depends on the transaction’s substance and available guidance, not the number of lines in a wallet export.
The same gap appears in multi-exchange workflows. A final platform sees a deposit and a sale. It has no visibility into the original acquisition date, the staking history, or activity inside a liquidity pool that preceded the transfer. A 1099-DA from that platform reports gross proceeds without the context needed to compute gain.
For investors whose activity spans bridges, protocols, and self-custody, the filing risk is no longer theoretical. The expanding broker-reporting regime means the IRS will have the sale side of more transactions on record. Unexplained basis gaps, zero-basis defaults, and proceeds figures that do not match broker forms will be easier to identify. Reconciliation before preparation, not during it, is where the compliance work now sits.
