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New crypto tax reporting rules 2026: What the 1099-DA means for you

Major crypto tax changes hit in 2026. Exchanges will report your cost basis to the IRS. Learn what's changing, what it means for you, and how to prepare.

Krystal Le, CPA8 min read

The IRS is done playing games with crypto.

Starting in 2026, exchanges will report your cryptocurrency cost basis directly to the IRS—not just your sales proceeds. This changes everything for crypto investors who've been flying under the radar.

The short answer: The new Form 1099-DA requires brokers to report both what you sold AND what you paid. The IRS will now know if your tax return doesn't match their records. If you've been sloppy with crypto taxes, 2026 is the year to get compliant.

What's changing in 2026

The new Form 1099-DA

The IRS introduced Form 1099-DA (Digital Asset Proceeds from Broker Transactions) with a phased rollout:

2025 (Tax Year):

  • Brokers report gross proceeds only
  • No cost basis reporting yet
  • You'll receive your first 1099-DA in early 2026

2026 (Tax Year) and Beyond:

  • Brokers report gross proceeds AND cost basis
  • Full gain/loss calculations provided
  • Much harder to underreport

This mirrors how stock brokers have reported for years. Crypto is finally getting the same treatment.

Who has to report

The IRS defines "brokers" broadly:

  • Centralized exchanges (Coinbase, Kraken, Binance.US, Gemini)
  • Payment processors that facilitate crypto transactions
  • Hosted wallet providers
  • Stablecoin issuers who regularly redeem tokens

Who doesn't have to report

Notably exempt:

  • Decentralized exchanges (Uniswap, SushiSwap)
  • Non-custodial wallets (MetaMask, Ledger)
  • DeFi protocols
  • Peer-to-peer transactions

Important: "Not reported" doesn't mean "not taxable." You're still required to report all taxable transactions—the IRS just won't have automatic visibility into DeFi activity.

Why this matters

For compliant taxpayers

Good news: your life gets easier.

  • Brokers calculate gains/losses for you
  • 1099-DA provides documentation
  • Less manual tracking required
  • Fewer calculation errors

For non-compliant taxpayers

Time to get right with the IRS.

The IRS will now automatically match:

  • What exchanges report you sold
  • What you report on your tax return

Mismatches trigger automated notices. Significant discrepancies trigger audits.

If you've been:

  • Not reporting crypto sales
  • Underreporting gains
  • Guessing at cost basis
  • Ignoring crypto-to-crypto trades

2026 is your wake-up call.

The cost basis challenge

Here's where things get complicated.

The problem with multiple exchanges

Most crypto investors don't trade on just one exchange. They might:

  • Buy Bitcoin on Coinbase
  • Transfer to Kraken
  • Trade for Ethereum
  • Move to a hardware wallet
  • Send to Uniswap
  • Transfer back to Coinbase
  • Sell

Each exchange only sees part of the picture. When you transfer crypto in, they don't know what you paid for it.

How exchanges will handle this

Starting in 2026, if an exchange doesn't know your cost basis:

  • They may report cost basis as "unknown" or $0
  • You'll need to provide accurate basis information
  • Or face phantom "gains" on your 1099-DA

Example:

  • You bought 1 BTC on Exchange A for $40,000
  • Transferred to Exchange B
  • Sold on Exchange B for $50,000
  • Exchange B reports: Proceeds $50,000, Cost Basis: Unknown
  • IRS sees: Possible $50,000 gain instead of $10,000

You'll need to reconcile this on your tax return—with documentation to back it up.

Universal transfer reporting (future)

The IRS is working on rules requiring brokers to report transfers between wallets. This would help track cost basis across platforms, but implementation is still years away.

What you need to do now

1. Gather your records

Before 2026 reporting kicks in fully, compile:

  • All exchange account histories
  • Wallet transaction records
  • Purchase receipts and confirmations
  • Records of crypto-to-crypto trades
  • DeFi transaction history

The more complete your records, the easier reconciliation will be.

2. Choose a cost basis method

You need to consistently apply one method:

FIFO (First In, First Out): Sell oldest coins first. IRS default if you don't specify.

LIFO (Last In, First Out): Sell newest coins first. Can be advantageous if recent purchases were at higher prices.

Specific Identification: Choose exactly which lots to sell. Most flexible but requires detailed records.

HIFO (Highest In, First Out): Sell highest-cost coins first to minimize gains. Requires specific identification.

Once you choose a method, apply it consistently.

3. Use crypto tax software

Tools like Koinly, CoinTracker, TokenTax, and ZenLedger can:

  • Import data from multiple exchanges
  • Track transfers between wallets
  • Calculate cost basis across platforms
  • Generate tax reports
  • Help identify discrepancies with 1099-DAs

The investment is worth it for anyone with more than casual crypto activity.

4. Provide cost basis to exchanges

Some exchanges now allow you to import cost basis for transferred-in crypto. Check if your exchange offers this feature and use it.

5. Review your 1099-DA carefully

When you receive your 1099-DA:

  • Compare to your own records
  • Identify any discrepancies
  • Document your actual cost basis
  • Be prepared to explain differences to the IRS

DeFi: The reporting gap

The new rules have a significant blind spot: decentralized finance.

What's NOT reported

  • Swaps on decentralized exchanges
  • Liquidity pool deposits/withdrawals
  • Yield farming rewards
  • Lending and borrowing
  • Bridge transactions
  • Wrapping/unwrapping tokens

Why this matters

If you're active in DeFi, you're still responsible for tracking and reporting everything yourself. The IRS won't receive automatic reports, but that doesn't mean they can't find out through:

  • Blockchain analysis
  • Centralized exchange on/off ramps
  • Information sharing between platforms
  • Future DeFi reporting requirements

The smart approach

Track your DeFi activity as carefully as your exchange activity. When you eventually move funds back to a centralized exchange, everything should reconcile.

The global picture: CARF

The U.S. isn't alone in tightening crypto reporting.

The Crypto-Asset Reporting Framework (CARF) is a global standard for crypto tax reporting. As of 2026, 48 countries have implemented it, including most major economies.

What this means:

  • International exchanges share information
  • Offshore accounts are less hidden
  • Moving crypto abroad doesn't escape reporting

The walls are closing in on crypto tax evasion worldwide.

Penalties for non-compliance

The IRS has multiple tools for enforcement:

  • 20% penalty on underpaid taxes due to negligence
  • 40% penalty for gross valuation misstatements

Failure to file/pay

  • 5% per month penalty for late filing (up to 25%)
  • 0.5% per month for late payment

Civil fraud

  • 75% penalty on underpayment due to fraud

Criminal penalties

  • Tax evasion: Up to $250,000 fine and 5 years prison
  • Filing false returns: Up to $250,000 fine and 3 years prison

The IRS has made crypto enforcement a priority. They're hiring specialists and investing in blockchain analysis tools.

How to get compliant

If you've been reporting accurately

Keep doing what you're doing. The 1099-DA will make your life easier by providing documentation.

If you've made honest mistakes

File amended returns (Form 1040-X) for previous years. Pay any taxes owed plus interest. Voluntary correction before IRS contact results in lower penalties.

If you've been significantly non-compliant

Consider professional help. Options may include:

  • Voluntary disclosure programs
  • Streamlined filing procedures
  • Professional representation

The sooner you address issues, the better the outcome.

Preparing for tax season 2026

Timeline

  • January 2026: Exchanges begin issuing 2025 1099-DAs (gross proceeds only)
  • April 2026: 2025 tax returns due
  • January 2027: Exchanges issue 2026 1099-DAs (with cost basis)
  • April 2027: 2026 tax returns due

Action items

Now:

  • Consolidate records from all exchanges and wallets
  • Choose and document your cost basis method
  • Consider crypto tax software
  • Review past returns for accuracy

By Year-End 2026:

  • Ensure all exchanges have accurate information
  • Document any cost basis for transferred crypto
  • Plan for any tax liability

When You Receive 1099-DA:

  • Compare to your records immediately
  • Document any discrepancies
  • Prepare explanations for your tax return

The bottom line

The era of casual crypto tax reporting is over.

The 1099-DA brings cryptocurrency into the same reporting framework as stocks and securities. The IRS will have visibility into your exchange activity, and matching algorithms will catch discrepancies.

For most investors, this is actually good news—better reporting means less manual work and fewer calculation errors. But it also means getting your records in order and ensuring past returns are accurate.

If you've been putting off dealing with crypto taxes, 2026 is the year to get serious. The reporting infrastructure is coming whether you're ready or not.

Need help getting your crypto records in order before the 1099-DAs start arriving? Let's talk →

— Krystal Le, CPA

LeCPA helps DFW crypto investors prepare for the new reporting requirements.

Sources:

Krystal Le, CPA

Founder · LeCPA

Texas CPA since 2021. Founder of LeCPA in Richardson, Texas.

About Krystal

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