Form 1099-DA: The Definitive Guide for Crypto Investors

If you’re buying and selling cryptocurrency, you might receive Form 1099-DA (i.e. “Digital Asset”) in the near future. 

Recent reports suggest that cryptocurrency exchanges may soon be required to send this form to customers. 

In this blog, we’ll break down everything we know so far about Form 1099-DA and explain how it can help you file your cryptocurrency taxes. 

What is a Form 1099? 

Form 1099 is used to report non-employment income (income you receive outside of your job) to the IRS. 

Currently, there are more than 20 different variations of Form 1099. The versions most commonly used by cryptocurrency exchanges are Form 1099-B, Form 1099-MISC, and Form 1099-K. 

For more information, check out our guide to Form 1099 for cryptocurrency. 

What is Form 1099-DA? 

An article in Bloomberg stated that the IRS will be unveiling a new version of Form 1099 in the near future: Form 1099-DA. This form is specifically designed to handle the reporting for cryptocurrency and digital assets. 

Why is the IRS creating Form 1099-DA?

In November 2021, the American infrastructure bill was signed into law by President Biden. The bill stated that cryptocurrency exchanges would be required to report their customer’s capital gains and losses to the IRS through 1099 forms starting in the 2023 tax year. 

This law drew criticism from prominent voices in the cryptocurrency ecosystem. Cryptocurrency’s unique properties make it difficult for exchanges to accurately report their customers’ capital gains and losses. 

It’s likely that the IRS is creating Form 1099-DA to tackle this issue and make it easier for cryptocurrency exchanges to report their customers’ activity. 

What’s the problem with the current 1099 forms? 

Remember, cryptocurrency capital gains are typically calculated through the following formula. 

However, it’s often difficult for exchanges to track cryptocurrency cost basis. Consider the example below. 

If David decides to sell his Bitcoin for $20,000, BlockFi won’t know his original cost basis. His cost basis may be reported on his tax form as ‘missing’ or ‘unknown’ on his 1099 form.  

Unless David can prove that he originally bought his Bitcoin for $10,000, he may be responsible for the full $20,000 of capital gain. As you can imagine, this missing information can create stress and confusion for taxpayers.

Will Form 1099-DA make it easier for me to file my crypto taxes? 

Since no official information has been provided on Form 1099-DA, we don’t currently know how Form 1099-DA will be different from other 1099 forms. 

Some tax experts speculate that with Form 1099-DA, exchanges will no longer be required to report cost basis—the form may solely require exchanges to report gross proceeds from crypto disposals that happened within their platforms. If this is the case, the burden will be on the taxpayer to track the cost basis for all of their crypto-assets and accurately report their capital gains. 

To accurately report your crypto taxes, you’ll need to keep a comprehensive record of your cryptocurrency transactions across all of your wallets. For more information, check out our guide to reporting your crypto taxes.

File your cryptocurrency taxes today 

Looking for an easy way to track your cost basis and report your cryptocurrency taxes? CoinLedger can help. 

CoinLedger can connect with exchanges like Coinbase and blockchains like Ethereum so that you can file your crypto taxes in minutes. More than 300,000 crypto investors across the globe use CoinLedger to simplify their tax season. 

‍Get started with CoinLedger today — there’s no need to enter your credit card details until you’re 100% sure your information is accurate.