Crypto Cost-Basis Reporting Starts in 2026 — Form 1099-DA and the New IRS Matching Risk
5 min read · By Jonathan C. Do, Esq. · September 2026
For years, crypto reporting ran on the honor system: the IRS knew you had an exchange account, but not what you paid for anything. That ends with the 2026 tax year. Under Treasury's final broker regulations, custodial platforms must now report cost basis — not just proceeds — on Form 1099-DA, giving the IRS both halves of the equation for the first time.
The two-step phase-in
The final regulations (fact sheet FS-2024-23, issued June 2024) staged the rollout deliberately:
- Gross proceeds — brokers report for transactions effected on or after January 1, 2025.
- Basis — brokers report on certain transactions effected on or after January 1, 2026.
2025 was the proceeds-only year, and it was cushioned. Under Notice 2024-56, the IRS said it would not impose failure-to-file or failure-to-furnish penalties for 2025 transactions where a broker made a good-faith effort to file correctly and on time. That grace was for the brokers, not for you — the income was always taxable.
Why basis reporting changes the risk profile
A proceeds-only 1099 tells the IRS you sold $180,000 of digital assets. It says nothing about whether you had a $2,000 gain or a $40,000 loss. Basis reporting closes that gap and makes crypto look, to the IRS's automated systems, much more like a brokerage 1099-B.
That is the practical takeaway: machine-matchable data invites machine-generated notices. If the numbers on your Schedule D don't reconcile with what the broker reported, expect an underreporter notice — the same CP2000 process that has driven stock and 1099-K disputes for years, with a 30-day window that runs whether or not you understand the math behind it.
The wallet-by-wallet rule catches people off guard
Revenue Procedure 2024-28 ended universal cost-basis tracking. Basis now has to be tracked per wallet or per account, and the revenue procedure gave taxpayers a transitional way to allocate units of unused basis to the assets held in each wallet or account as of January 1, 2025.
If you used a "universal pool" spreadsheet across five exchanges and three self-custody wallets and never made that allocation, your basis records and your brokers' basis records will not agree. That mismatch is exactly what a matching notice is built to find. Reconstruct your allocation now, while you still have exchange history to work from.
What is still not reported
Coverage is real but incomplete, and the gaps create their own trap. Under Notice 2024-57, brokers are not required to file Forms 1099-DA for certain transactions until further guidance, including:
- Wrapping and unwrapping transactions
- Liquidity provider transactions
- Staking transactions
- Digital asset lending
- Short sales of digital assets, and notional principal contracts
The final regulations also do not cover decentralized or non-custodial brokers that never take possession of the assets; Treasury has said it intends to address those separately. None of this makes the income tax-free. No form still means fully reportable — and any rewards or compensation earned in these transactions remain reportable regardless.
One more 2026 change: real estate closings
Real estate professionals treated as brokers must report the fair market value of digital assets paid by buyers and received by sellers in transactions with closing dates on or after January 1, 2026. If crypto touches a Bay Area property deal, it now leaves a paper trail at the closing table.
What to do before filing season
- Pull complete transaction history from every exchange and wallet while it's still accessible.
- Confirm your per-wallet basis allocation as of January 1, 2025, and document how you got there.
- Compare each Form 1099-DA you receive against your own records before you file, not after a notice arrives.
- Make sure your broker has a correct TIN on file — backup withholding relief for 2026 depends on TIN matching.
Got a crypto matching notice or an audit letter? Free consultation.
Digital asset cases turn on records and reconstruction. If the IRS is questioning your basis, your reporting, or prior unreported crypto activity, talk to a tax attorney before you respond. We handle IRS audits, appeals, and U.S. Tax Court matters from our San Jose office.
Request Free Consultation →About the author: Jonathan C. Do is a tax attorney with 25+ years representing businesses and individuals in IRS audits, appeals, collections, and U.S. Tax Court matters. He practices at Tax Resolution Center LLC in San Jose, CA.