Key takeaways
- Even if you never cashed out your crypto to USD, you may receive Form 1099-DA. Trading crypto for crypto, spending crypto, and paying gas fees are reported on the form.
- Cost basis is often missing on Form 1099-DA for these types of transactions. If you find yourself in this situation, don’t panic. You can provide the correct cost basis on Form 8949.
Do I get Form 1099-DA if I didn't sell crypto?
Yes. You will receive Form 1099-DA from an exchange if you disposed of cryptocurrency, even if you never converted your cryptocurrency to USD.
Remember, any ‘disposal’ of cryptocurrency is subject to capital gains tax. This includes trading crypto for crypto, spending crypto, and paying network fees.
What transactions are reported on Form 1099-DA?
Here are some examples of disposals that are reported on Form 1099-DA:
Crypto-to-crypto trades: Trading Bitcoin for Ethereum, swapping SOL for USDC, or any exchange of one digital asset for another is a disposal.
Spending crypto: Using Bitcoin to buy a product, paying for a service with ETH, or making any purchase with cryptocurrency is a taxable disposal.
Paying gas fees: When you spend crypto on network fees to process a transaction, you're disposing of that crypto. While the tax impact is usually small, these transactions are reported on Form 1099-DA.
How are crypto disposals taxed?
When you dispose of cryptocurrency, you’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it.
Your crypto tax bill depends on how long you held your cryptocurrency. Short-term gains (if you held your crypto for 12 months or less) are taxed at your regular income rate. Long-term gains (if you hold for more than 12 months) are taxed at lower rates of 0%, 15%, or 20%.
Why is cost basis missing on Form 1099-DA?
Cost basis information for cryptocurrency disposals is often missing/incomplete on Form 1099-DA. Typically, this issue occurs if you transfer crypto between wallets and exchanges.
In this case, Exchange B has no record of Lisa's original $5,000 purchase.
Exchange B will report the trade on Form 1099-DA with $7,000 proceeds but "Unknown" cost basis. If Lisa has no record of her original purchase, she may be responsible for $7,000 of capital gain.
Luckily, there’s an easy fix to this issue. The IRS allows you to simply report your correct cost basis on Form 8949, provided that you have documentation of your original purchase.
What do I do with my Form 1099-DA?
Wondering what you should do when you receive Form 1099-DA? Here’s a step-by-step process:
Review your Form 1099-DA: Check that all listed transactions actually occurred and that proceeds numbers match your records.
Gather records from all platforms: Form 1099-DA only covers one exchange. Collect transaction history from every wallet, exchange, and DeFi platform you used.
Calculate your cost basis: Remember, cost basis on Form 1099-DA can be inaccurate. You should check your own records to confirm cost basis. This might require checking old purchase confirmations, bank statements, or records from other platforms. Alternatively, you can find this information automatically with crypto tax software.
Complete Form 8949: List each disposal with the correct cost basis, proceeds, and gain or loss on Form 8949. Your proceeds must match what's on Form 1099-DA. You can report your own cost basis for transactions, provided that it matches your records.
Transfer totals to Schedule D: Once you've filled out Form 8949, report your net gain/loss on Schedule D.
What do I do if Form 1099-DA is wrong?
While it is rare, there are some cases where your Form 1099-DA may be flat out wrong. For example, it may report transactions that never happened. Here's what you can do if you find yourself in this situation:
Request a corrected form: Contact the exchange's support team and ask for a corrected Form 1099-DA. Document your attempts at fixing the issue.
Calculate your actual liability: Use crypto tax software to get a record of all of your crypto transactions, across all of your wallets and exchanges.
File for an extension if needed: If you're waiting on a corrected form and the April deadline is approaching, file for an extension. This gives you until October to get a corrected form.
Attach an explanation: Write a brief memo noting the error, the steps you took to fix it, and how your Form 8949 reflects your actual activity. Then, attach it to your tax return.
There’s no need to request a corrected Form 1099-DA for cost basis errors. You can fix this by providing the correct numbers on Form 8949.
How CoinLedger can help
Tracking disposals across multiple platforms and calculating cost basis manually is time-consuming. CoinLedger automates the process.
Connect your wallets and exchanges, and CoinLedger imports all your transactions automatically. The software can calculate your gain and loss for every disposal, and generate complete tax forms in minutes.
Frequently asked questions
- Is trading crypto for crypto taxed like selling?
- Do I need to report crypto transactions if I never cashed out to dollars?
- Why does my Form 1099-DA show transactions where I didn’t sell?
- What if Form 1099-DA only shows some of my crypto activity?
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