1099-DA Filing Guide 2026: Your Crypto Tax Form Arrives Feb 17 — Fix the $0 Cost Basis Before You File

✍️ Written by Davit Cho

Crypto Tax Specialist & CEO at JejuPanaTek

13+ Years Experience | Patent #10-1998821 | IRS Compliance Expert

davitchh@proton.me

Published: February 14, 2026  |  Last Updated: February 14, 2026

Your Form 1099-DA is arriving this week — and it's unlike any crypto tax form you've seen before. For the first time in history, the IRS is receiving transaction-level data from every major U.S. crypto exchange: Coinbase, Kraken, Gemini, Robinhood, PayPal, and more.

The deadline for brokers to deliver your 1099-DA is February 17, 2026. But here's the problem: for 2025 transactions, this form reports only gross proceeds — not cost basis. That means the IRS sees every dollar you received from selling crypto as pure profit — unless you correct it yourself.

This guide walks you through exactly what the 1099-DA is, what's missing, how much it could cost you, and the step-by-step process to file correctly before April 15.

⚠️ 1099-DA DEADLINE: FEBRUARY 17, 2026 — 3 DAYS LEFT

⚡ Quick Facts — 1099-DA Filing 2026

• Form: 1099-DA (Digital Asset) — brand new for 2025 tax year
• Broker Deadline: February 17, 2026
• What's Reported to IRS: Gross proceeds only (no cost basis for 2025)
• Cost Basis Reporting: Starts for 2026 transactions (covered assets only)
• Your Filing Deadline: April 15, 2026 (or Oct 15 with extension)
• Key Form: Form 8949 + Schedule D
• IRS Relief: Notice 2025-7 — you CAN report your own cost basis
• Default Method: FIFO unless you elect Specific Identification
• Risk if Unfixed: IRS treats $0 basis = 100% taxable gain

📋 Table of Contents

1. What Is Form 1099-DA?
2. What's Reported — and What's Dangerously Missing
3. The $0 Cost Basis Trap (With Dollar Examples)
4. Notice 2025-7: The IRS Relief You Must Know
5. Form 8949: Where Every Crypto Trade Goes
6. Exchange Comparison: Coinbase vs Kraken vs Gemini vs Robinhood
7. Per-Wallet Cost Basis: The Rule That Complicates Everything
8. 7-Step Filing Action Plan
9. FAQ: 15 Questions

1. What Is Form 1099-DA?

Form 1099-DA is the crypto equivalent of the 1099-B that stock brokers have been sending for decades. It's an informational tax form issued by U.S. digital asset brokers — including centralized exchanges like Coinbase, Kraken, and Gemini — to report taxable digital asset disposals to both you and the IRS.

This form exists because of the 2021 Infrastructure Investment and Jobs Act, which required crypto brokers to adopt the same reporting framework as traditional securities. After years of delays and rulemaking, 2025 is the first tax year it's in effect.

Feature	1099-DA (Crypto)	1099-B (Stocks)
First Year	2025 tax year	Decades
Issued By	Crypto exchanges (CEX)	Stock brokers
Reports Proceeds	✅ Yes	✅ Yes
Reports Cost Basis	❌ Not for 2025	✅ Yes (covered securities)
Covers DeFi/DEX	❌ No	N/A
Covers Transfers	❌ No	✅ Broker-to-broker
Filed Per	Per transaction to IRS; consolidated to you	Consolidated

⚠️ Critical Distinction: The 1099-DA is an informational form — it does NOT determine your tax owed. It does NOT replace Form 8949. It is the starting point, not the final answer. Relying on it alone without reconciling cost basis is how people accidentally overpay thousands in tax.

2. What's Reported — and What's Dangerously Missing

✅ What IS on the 1099-DA

Field	2025 Transactions	2026+ Transactions
Date of sale/disposition	✅ Reported	✅ Reported
Gross proceeds	✅ Reported	✅ Reported
Asset type (BTC, ETH, etc.)	✅ Reported	✅ Reported
Number of units	✅ Reported	✅ Reported
Cost basis	❌ NOT reported to IRS	✅ Covered assets only
Gain/loss calculation	❌ NOT reported	❌ Partial
Date acquired	❌ Often missing	✅ Covered assets

❌ What is NOT on the 1099-DA

This is where most people get blindsided. The following taxable activities are completely absent from the 1099-DA:

Activity	On 1099-DA?	Still Taxable?
Crypto transferred IN from another exchange/wallet	❌ Shows $0 basis	✅ Yes — you must report
DeFi trades (Uniswap, Aave, Curve, etc.)	❌ Not included	✅ Yes
DEX trades (Jupiter, PancakeSwap, etc.)	❌ Not included	✅ Yes
Staking rewards	❌ (on 1099-MISC if >$600)	✅ Ordinary income
Mining income	❌ Not included	✅ Ordinary income
Airdrops	❌ Not included	✅ Ordinary income at FMV
Crypto received as payment	❌ Not included	✅ Ordinary income
NFT sales under $600	❌ Threshold exemption	✅ Yes
Stablecoin sales under $10,000	❌ Threshold exemption	✅ Yes (if gain exists)
Wrapping/unwrapping (ETH→WETH)	❌ Not included	⚠️ Possibly

⚠️ Just because it's not on the 1099-DA doesn't mean it's not taxable. You are still required to report ALL taxable disposals on Form 8949 — exactly as you have in prior years. The 1099-DA is additional reporting, not a replacement.

3. The $0 Cost Basis Trap (With Dollar Examples)

This is the single most expensive mistake you can make this tax season. Here's a real-world example:

You sold 1 BTC on Coinbase in 2025 for $66,000. Here's what happens depending on how cost basis is handled:

Scenario	Cost Basis	Taxable Result	Tax @ 24%
🔴 1099-DA only (no basis)	$0	+$66,000 gain	$15,840
🟡 FIFO default (bought $35K in 2021)	$35,000	+$31,000 gain	$7,440
🟢 Specific ID (bought $97K in 2024)	$97,000	−$31,000 loss	$0 (+ deduction)

$15,840 vs. $0 — Same sale. Same Coinbase account. The only difference: whether you report cost basis correctly.

Why Does This Happen?

For the 2025 tax year, brokers are only required to report gross proceeds to the IRS. Cost basis is NOT reported. Many taxpayer copies will show $0, "unknown", or simply leave the field blank.

If you import this into TurboTax, H&R Block, or hand it to your preparer without fixing the basis — the software calculates your gain as:

$66,000 proceeds − $0 basis = $66,000 taxable gain

That's $15,840 in tax on money you may have actually lost.

✅ Key Takeaway: Never file using only 1099-DA numbers. Always calculate your actual cost basis using purchase records or crypto tax software. Use Specific Identification to select the highest-cost lots first (HIFO strategy) to minimize gains or maximize deductible losses.

4. Notice 2025-7: The IRS Relief You Must Know

The IRS knows the 1099-DA system isn't perfect yet. That's why they issued Notice 2025-7 — providing temporary relief for the 2025 tax year.

What Notice 2025-7 Allows

Relief Provision	What It Means for You
Use your own lot identification	You can choose Specific ID (including HIFO) — not stuck with FIFO
Rely on your own records	Your purchase records / crypto tax software are valid cost basis sources
Override $0 basis on 1099-DA	You can report correct basis on Form 8949 even if the 1099-DA shows $0
Transition year flexibility	The IRS acknowledges brokers have incomplete data

✅ This relief is critical. Without it, taxpayers would be forced to accept $0 or "unknown" basis — which would result in billions in overtaxation across the crypto market. The IRS explicitly says: you are allowed and expected to report your own cost basis.

⚠️ This relief is temporary. Starting with 2026 transactions, brokers must report cost basis for "covered" digital assets. The window to use broad lot-identification flexibility may narrow. Act now while the rules favor taxpayers.

5. Form 8949: Where Every Crypto Trade Goes

The 1099-DA is what the exchange sends. Form 8949 is what YOU file. Every single crypto disposal — whether it appeared on a 1099-DA or not — must be reported here.

Which Box Do You Check?

Box	When to Use	Example
Box A	Short-term, basis reported to IRS on 1099-DA	N/A for 2025 (basis not reported yet)
Box B	Short-term, basis NOT reported to IRS	N/A for 2025
Box D	Long-term, basis reported to IRS on 1099-DA	N/A for 2025
Box E	Long-term, basis NOT reported to IRS	N/A for 2025
Box G	Short-term, reported on 1099-DA, basis reported to IRS	Future years (2026+)
Box H ⭐	Short-term, reported on 1099-DA, basis NOT reported to IRS	Most 2025 CEX trades
Box I ⭐	Short-term, NOT reported on any 1099	DeFi, DEX, wallet trades
Box K ⭐	Long-term, reported on 1099-DA, basis NOT reported to IRS	Most 2025 CEX trades (held >1 yr)
Box L ⭐	Long-term, NOT reported on any 1099	DeFi, DEX, wallet trades (held >1 yr)

✅ For 2025 filing, most crypto investors will use:
→ Box H or K for trades that appear on a 1099-DA (CEX trades)
→ Box I or L for everything else (DeFi, DEX, wallet-to-wallet, mining sales, airdrop sales)

Form 8949 Column Guide

Column	What to Enter
(a) Description	e.g., "1.0 BTC"
(b) Date acquired	Original purchase date
(c) Date sold	Sale/trade date
(d) Proceeds	Sale price (should match 1099-DA)
(e) Cost basis	YOUR calculated basis (not the $0 from 1099-DA)
(f) Adjustment code	Use code B if basis was not reported to IRS
(g) Adjustment amount	Difference between 1099-DA basis and your actual basis
(h) Gain or loss	(d) minus (e) plus/minus (g)

⚠️ If your proceeds don't match the 1099-DA: The IRS computer will flag the discrepancy. Always make sure Column (d) proceeds match what the exchange reported. Adjust cost basis in Column (e), not proceeds.

6. Exchange Comparison: Coinbase vs Kraken vs Gemini vs Robinhood

Not all 1099-DAs are created equal. Each exchange handles reporting differently. Here's what to expect:

Feature	Coinbase	Kraken	Gemini	Robinhood
Issues 1099-DA	✅ Yes	✅ Yes	✅ Yes	✅ Yes
Reports gross proceeds to IRS	✅	✅	✅	✅
Reports cost basis to IRS (2025)	❌ No	❌ No	❌ No	❌ No
Shows basis on taxpayer copy	⚠️ Partial	⚠️ Partial	⚠️ Partial	✅ More complete
Tracks transferred-in basis	❌	❌	❌	❌
Includes staking on 1099-DA	❌ (1099-MISC)	❌ (1099-MISC)	❌ (1099-MISC)	❌ (1099-MISC)
Includes DeFi/DEX	❌	❌	❌	❌
CSV export available	✅	✅	✅	✅
API for tax software	✅	✅	✅	⚠️ Limited
Delivery format	Consolidated PDF	Consolidated PDF	Consolidated PDF	Consolidated PDF
Expected delivery	By Feb 17	By Feb 17	By Feb 17	By Feb 17

✅ Key Insight: No single exchange gives you the full picture. If you used multiple platforms — or ever transferred crypto between them — you need crypto tax software to reconcile cost basis across all accounts. The 1099-DA from each exchange only covers what happened on that exchange.

PayPal & Cash App Users

PayPal and Cash App also issue 1099-DAs for 2025 crypto sales. PayPal's form may show $0 proceeds for certain conversions (e.g., crypto-to-crypto within PayPal). Don't assume $0 proceeds means $0 tax — verify every line against your transaction history.

7. Per-Wallet Cost Basis: The Rule That Complicates Everything

Starting January 1, 2025, the IRS banned the universal wallet method under Revenue Procedure 2024-28. This is the second major rule change hitting you this tax season — and it directly affects how you use your 1099-DA.

Before Jan 1, 2025	After Jan 1, 2025
Pool all BTC across wallets into one "universal" lot	Each wallet/exchange = separate tax account
Choose any lot from any wallet when selling	Can only select lots from the wallet where the sale happens
Flexible tax optimization across platforms	Must track basis per-wallet; FIFO default per wallet

How This Multiplies the 1099-DA Problem

Imagine you hold BTC on both Coinbase and Kraken:

Wallet	Purchase Price	Sale Price	FIFO Result
Coinbase (bought Jan 2024)	$97,000	$66,000	−$31,000 LOSS
Kraken (bought Mar 2021)	$23,000	$66,000	+$43,000 GAIN

Same asset (BTC). Same sale price ($66K). Completely different tax outcomes — a $31K deductible loss vs. a $43K taxable gain — depending on which wallet the sale occurs in.

And both 1099-DAs show $0 cost basis. So without correction, both sales look like $66,000 in pure profit to the IRS — that's $132,000 in phantom gains and over $31,680 in unnecessary tax.

📖 Complete Per-Wallet Migration Guide
Step-by-step walkthrough of Rev. Proc. 2024-28, lot allocation, and FIFO vs. Specific ID strategies Read the Full Per-Wallet Guide →

8. 7-Step Filing Action Plan

Step 1: Collect ALL 1099-DAs (By Feb 17)

Check every exchange you used in 2025: Coinbase, Kraken, Gemini, Robinhood, PayPal, Cash App, Crypto.com. Download each 1099-DA from your account's tax documents section. You should receive one per exchange.

Step 2: Export Full Transaction History from Each Exchange

The 1099-DA doesn't include everything. Download your complete CSV transaction history from each platform. This captures transfers, staking rewards, referral bonuses, and small trades that may fall below reporting thresholds but are still taxable.

Step 3: Gather All Non-Exchange Records

Collect records for: DeFi/DEX trades (Uniswap, Aave, Jupiter, etc.), wallet-to-wallet transfers, mining income, airdrops, staking rewards from non-custodial validators, crypto payments received, and gifts.

Step 4: Import Everything into Crypto Tax Software

Software	Per-Wallet Tracking	Spec ID / HIFO	8949 Generation	Starting Price
CoinTracker	✅	✅	✅	$59/yr
Koinly	✅	✅	✅	$49/yr
CoinLedger	✅	✅	✅	$49/yr
TaxBit	✅	✅	✅	Free (basic)
Awaken Tax	✅	✅	✅	$50/yr
Summ	✅	✅	✅	$45/yr

Step 5: Reconcile 1099-DA Proceeds with Software Output

Compare gross proceeds on each 1099-DA against your tax software's totals. They should match. If they don't, common reasons include: fee handling differences, stablecoin conversion rounding, crypto-to-crypto trade price discrepancies. Document any differences.

Step 6: Choose Your Accounting Method

Method	How It Works	Best For
FIFO (default)	First purchased = first sold	Rarely optimal — often triggers highest gains
LIFO	Last purchased = first sold	Better if recent buys were at higher prices
HIFO	Highest cost lot sold first	✅ Usually best — minimizes taxable gains
Specific ID	You choose which lot to sell	✅ Maximum control — requires documentation

✅ Pro Tip: HIFO (Highest In, First Out) is usually the most tax-efficient method. Under Notice 2025-7, you are explicitly allowed to use Specific Identification for 2025 transactions. Most crypto tax software can automatically apply HIFO across your portfolio.

Step 7: File Form 8949 + Schedule D

Generate Form 8949 from your crypto tax software. Use Box H/K for trades reported on 1099-DA and Box I/L for trades not reported on any 1099. Transfer totals to Schedule D. If you have more than 50 transactions, attach the 8949 as a supporting PDF — TurboTax, H&R Block, FreeTaxUSA, and TaxAct all accept crypto tax software imports.

⚠️ Filing Deadline: April 15, 2026. If you need more time, file Form 4868 for an automatic extension to October 15. The extension gives you more time to file, but NOT more time to pay. Estimate and pay any tax owed by April 15 to avoid penalties.

9. FAQ: 15 Critical Questions About the 1099-DA

Q1: What is Form 1099-DA?

Form 1099-DA is a new IRS informational tax form that reports digital asset disposals (sales, trades, conversions) from U.S. crypto brokers. It's the crypto equivalent of the 1099-B for stocks. For 2025 transactions, it reports gross proceeds only — not cost basis. IRS Source →

Q2: When will I receive my 1099-DA?

The IRS deadline for brokers to deliver 1099-DA forms to taxpayers is February 17, 2026. Check your exchange account under Settings → Tax Documents. Some exchanges deliver electronically; others may mail a physical copy.

Q3: Does the 1099-DA include cost basis?

Not for 2025 transactions. Brokers are only required to report gross proceeds to the IRS this year. Cost basis reporting to the IRS begins for transactions on or after January 1, 2026, and only for "covered" digital assets. Your taxpayer copy may show partial or $0 basis.

Q4: What happens if I file using only the 1099-DA numbers?

The IRS will treat your sale proceeds as 100% gain because no cost basis offsets it. For example, selling 1 BTC at $66,000 would appear as $66,000 in taxable gains with a $15,840 tax bill at 24%. You must report your own cost basis on Form 8949 to avoid this.

Q5: Can I report my own cost basis if the 1099-DA shows $0?

Yes. Under Notice 2025-7, Section 4.02, the IRS explicitly allows taxpayers to use their own lot identification and cost basis records. You are allowed and expected to override $0 or "unknown" basis on the 1099-DA with your actual purchase records.

Q6: Do I need to match my 1099-DA exactly?

Your gross proceeds should match what the exchange reported — the IRS will cross-check this. However, your cost basis should reflect your actual records, not the exchange's incomplete data. Use Form 8949 Column (f) Code B and Column (g) to explain adjustments.

Q7: What about crypto I transferred into an exchange from a wallet?

The exchange cannot track cost basis for transferred-in crypto. The 1099-DA will show $0 basis for these assets. You must use records from the original purchase — whether that's another exchange, a DeFi protocol, mining records, or airdrop FMV — to determine and report the correct basis.

Q8: I used multiple exchanges. Do I get multiple 1099-DAs?

Yes. Each exchange issues its own 1099-DA covering only the transactions that occurred on that platform. If you traded on Coinbase, Kraken, and Gemini, expect three separate forms. Each one goes to both you and the IRS.

Q9: Are DeFi and DEX trades on the 1099-DA?

No. Decentralized exchanges and DeFi protocols are not currently required to issue 1099-DAs (though proposed regulations may change this). You must self-report all DeFi/DEX disposals on Form 8949 using Box I (short-term) or Box L (long-term).

Q10: What about staking rewards?

Staking rewards are taxable as ordinary income at fair market value when received. They are typically reported on 1099-MISC (if over $600), NOT on the 1099-DA. When you later sell staked crypto, the sale goes on Form 8949 with your cost basis being the FMV at the time the reward was received.

Q11: Does the wash sale rule apply to crypto?

As of February 2026, the wash sale rule does not apply to cryptocurrency. You can sell crypto at a loss and repurchase immediately — this is legal tax-loss harvesting. However, Congress has proposed extending the rule to crypto in future legislation. Tax-Loss Harvesting Guide →

Q12: What is per-wallet cost basis?

Starting January 1, 2025, under Revenue Procedure 2024-28, each wallet and exchange is treated as a separate tax account. You can no longer pool cost basis across platforms. FIFO is the default per wallet unless you elect Specific Identification. Per-Wallet Guide →

Q13: Can I use HIFO instead of FIFO?

Yes. Under Notice 2025-7's temporary relief, you can elect Specific Identification (which includes HIFO — Highest In, First Out) for 2025 transactions. This is usually the most tax-efficient method. You must maintain adequate records showing which specific lots you sold.

Q14: What if I don't receive a 1099-DA?

You are still required to report all crypto transactions regardless of whether you receive a 1099-DA. The IRS may still have received a copy from the exchange. Not receiving the form is not a valid excuse for non-reporting. If you traded on a U.S. exchange, contact them to request your form.

Q15: Should I file now or wait?

Wait until you have ALL 1099-DAs (deadline Feb 17) and have reconciled cost basis using tax software. Filing too early with incomplete data can result in overpaying tax. If you need more time, file Form 4868 by April 15 for an automatic extension to October 15. Pay estimated tax by April 15 to avoid penalties.

📚 Related Guides

Per-Wallet Cost Basis 2026 The new IRS rule that changes everything — complete migration guide Tax-Loss Harvesting Mega Guide BTC down 48% from ATH — turn this crash into tax savings Coinbase Q4 $667M Loss What this means for your 1099-DA and crypto taxes CARF 2027 Enforcement Playbook 48 countries sharing your crypto data starting 2027 SEC + CFTC Project Crypto 2026 How single rulebook changes your staking and DeFi taxes DeFi Users: Form 8949 Mismatch Why IRS audit flags are automatic in 2026

Disclaimer: This article is for informational and educational purposes only. It does not constitute tax, legal, or financial advice. Tax laws are complex, change frequently, and vary by jurisdiction. Consult a qualified tax professional (CPA, tax attorney, or enrolled agent) before making any tax-related decisions. The author and Legal Money Talk are not responsible for any actions taken based on this content. All information is based on publicly available IRS guidance, including Notice 2025-7, Revenue Procedure 2024-28, and the Form 1099-DA instructions as of February 2026. Filing requirements and deadlines are subject to change.

✍️ Written by Davit Cho

Crypto Tax Specialist & CEO at JejuPanaTek

13+ Years Experience | Patent #10-1998821 | IRS Compliance Expert

davitchh@proton.me

Published: February 13, 2026  |  Last Updated: February 13, 2026

Coinbase Q4 $667M Loss: What It Means for Your Crypto Taxes and 1099-DA

On February 12, 2026, Coinbase (COIN) reported a $667 million net loss for Q4 2025 — ending an 8-quarter profit streak. Revenue dropped 22% year-over-year to $1.78 billion. Trading revenue crashed 37% YoY to $983 million. COIN stock closed at $141, down 68% from its all-time high of $444.

But here's what most investors are missing: this earnings report has direct tax implications for every Coinbase user filing in 2026. Your 1099-DA is arriving (deadline: Feb 17), cost basis rules just changed, and the numbers on that form may be dangerously incomplete.

⚠️ 1099-DA DEADLINE: FEBRUARY 17, 2026
Coinbase must deliver your Form 1099-DA by Feb 17, 2026. For 2025 transactions, this form reports only gross proceeds — NOT cost basis. If you file using only 1099-DA data, the IRS will treat your entire sale amount as 100% profit. IRS Source →

⚡ Quick Facts — Coinbase Q4 2025

• Q4 Net Loss: $667M (vs $1.29B profit in Q4 2024)
• Q4 Revenue: $1.78B (‑22% YoY, ‑5% QoQ)
• Q4 Trading Revenue: $983M (‑37% YoY)
• COIN Stock: $141.09 close (‑68% from $444 ATH)
• Cash Reserves: $11.3B
• Share Buyback: $1.7B (Q4 + Feb 2026)
• Coinbase One Subscribers: ~1 million
• 1099-DA: First year issued; gross proceeds only for 2025
• Cost Basis Reporting: Mandatory starting Jan 1, 2026 transactions

📋 Table of Contents

1. Coinbase Q4 by the Numbers
2. Why the $667M Loss Isn't What You Think
3. Your 1099-DA: What Coinbase Reports vs. What It Doesn't
4. The Missing Cost Basis Trap (With Dollar Examples)
5. Per-Wallet Rules: How Coinbase Handles the New IRS Mandate
6. COIN Stock Down 68% — Tax-Loss Harvesting Opportunity
7. 5-Step Action Plan Before April 15
8. FAQ: 15 Questions

1. Coinbase Q4 by the Numbers

Metric	Q4 2025	Change
Total Revenue	$1.78B	‑22% YoY
Transaction Revenue	$983M	‑37% YoY
Consumer Transaction Revenue	$734M	‑13% QoQ
Institutional Transaction Revenue	$185M	+37% QoQ
Subscription & Services	$727M	‑3% QoQ
Stablecoin Revenue	$364M	+3% QoQ
Net Income (Loss)	($667M)	vs +$1.29B Q4'24
Adjusted EBITDA	$566M	‑56% YoY
Adjusted Net Income	$178M	Operationally profitable
COIN Stock Close	$141.09	‑68% from ATH ($444)
After-Hours	$142.31	‑7.9% on day
Cash & Equivalents	$11.3B	‑$0.7B QoQ
Share Buyback (Q4 + Feb '26)	$1.7B	8.2M shares total
Full Year Revenue	$7.2B	+9% YoY
Full Year Trading Volume	$5.2T	+156% YoY
Coinbase One Subscribers	~1M	3x in 3 years
Employees	4,951	+31% YoY

Source: Coinbase Shareholder Letter, Feb 12, 2026

📌 Related Guide

Understand the new per-wallet cost basis rule that impacts every Coinbase user

Per-Wallet Cost Basis Migration Guide →

2. Why the $667M Loss Isn't What You Think

The headline is alarming — but the breakdown tells a completely different story:

Component	Amount	Type
Crypto asset portfolio loss	$718M	Largely UNREALIZED
Strategic investment loss (incl. CRCL)	$395M	Paper loss
Adjusted Net Income (operations)	+$178M	Profitable
Adjusted EBITDA	+$566M	Cash-generating

Translation: Coinbase's core business still made money. The $667M loss was driven almost entirely by unrealized drops in their own crypto holdings (mainly BTC and ETH) — not by operational failure. They hold $11.3B in cash, repurchased $1.7B of their own stock, and still generated positive Adjusted EBITDA.

💡 Why this matters for YOUR taxes: If Coinbase — a public company with hundreds of accountants — got hit by $718M in unrealized crypto losses, the same market decline is sitting in your Coinbase account right now. The question is whether you're reporting it correctly. Unrealized losses don't help you at tax time — but realized losses through tax-loss harvesting can save you thousands.

📉 Turn Losses Into Savings

BTC is down 48% from ATH. Learn how to harvest those losses legally.

Tax-Loss Harvesting Mega Guide →

3. Your 1099-DA: What Coinbase Reports vs. What It Doesn't

This is the first year Coinbase is required to issue Form 1099-DA. Here's what's on it — and what's critically missing:

Field	2025 Transactions (This Filing)	2026+ Transactions (Next Year)
Date of sale	✅ Reported	✅ Reported
Gross proceeds	✅ Reported	✅ Reported
Cost basis	❌ NOT reported	✅ Covered assets only
Gain/loss calculation	❌ NOT reported	❌ Partial
Transferred-in assets basis	❌ Shows $0	❌ Still shows $0
DeFi / DEX transactions	❌ Not included	❌ Not included
Crypto-to-crypto trades	✅ Reported	✅ Reported

🚨 The Critical Danger: The IRS gets a copy of your 1099-DA showing your sales proceeds. Without cost basis, the IRS computer matches your sale at $0 cost = 100% taxable profit. You sold 1 BTC for $66,000? The IRS sees $66,000 in taxable gains — unless you report the correct cost basis yourself on Form 8949.

What Coinbase Cannot Track

Even when cost basis reporting becomes mandatory for 2026 transactions, Coinbase still cannot report basis for:

→ Crypto transferred IN from another exchange (MetaMask, Kraken, Ledger, etc.)
→ Crypto purchased before your Coinbase account was created
→ Crypto acquired through mining, airdrops, staking rewards, or hard forks
→ Crypto received as payment or gifts
→ Any DeFi/DEX activity (Uniswap, Aave, etc.)

For all of these, you are responsible for calculating and reporting cost basis on Form 8949. Coinbase's 1099-DA will show these as $0 basis — which means 100% taxable if you don't correct it.

Sources: Coinbase Help — 1099-DA · IRS — Understanding Form 1099-DA · Awaken Tax — Coinbase 1099-DA Limitations

4. The Missing Cost Basis Trap (With Dollar Examples)

Let's say you sold 1 BTC on Coinbase in 2025 for $66,000. Here's what happens depending on how cost basis is reported:

Scenario	Cost Basis	Taxable Result	Tax @ 24%
1099-DA only (no basis reported)	$0	+$66,000 gain	$15,840
FIFO default (bought at $35K in 2021)	$35,000	+$31,000 gain	$7,440
Average cost (if it were allowed)	$66,000	$0	$0
Specific ID (bought at $97K in 2024)	$97,000	‑$31,000 loss	$0 (+ deduction)

$15,840 vs. $0

Same 1 BTC sale. Same Coinbase account. The only difference: whether you report cost basis correctly.

✅ Key Takeaway: Never file your taxes using only the 1099-DA numbers. Always calculate your actual cost basis using purchase records or crypto tax software. Use Specific Identification to select the highest-cost lots first (HIFO strategy) — this minimizes gains or maximizes deductible losses.

5. Per-Wallet Rules: How Coinbase Handles the New IRS Mandate

Starting January 1, 2025, the IRS banned the universal wallet method under Revenue Procedure 2024-28. This means:

→ Each wallet and exchange is treated as a separate tax account
→ Cost basis cannot be pooled across platforms
→ FIFO is the default if you don't elect Specific Identification
→ Coinbase can only track basis for crypto bought and sold within Coinbase

What This Means for Coinbase Users Specifically

Situation	Coinbase Can Track Basis?	Your Action Required
Bought BTC on Coinbase → Sold on Coinbase	✅ Yes	Verify accuracy, choose Spec ID if beneficial
Bought BTC on Kraken → Transferred to Coinbase → Sold	❌ No — shows $0 basis	Manually calculate basis from Kraken records
Received BTC from mining → Sent to Coinbase → Sold	❌ No	Use FMV at time of mining as basis
Bought BTC on Coinbase → Transferred to Ledger → Sold on Kraken	❌ Not Coinbase's problem	Track basis from original Coinbase purchase
Staking rewards earned on Coinbase → Sold	✅ Partial	Verify FMV at time rewards were received
Airdrop received in Coinbase wallet → Sold	❌ Likely missing	Record FMV at time of airdrop

💡 Critical Insight: Coinbase holds more crypto than any other company — over 12% of all crypto globally. But their 1099-DA can only track cost basis for assets bought directly on Coinbase. If you've ever transferred crypto in from any other source, the basis is on you.

📌 Complete Per-Wallet Migration Guide

Step-by-step instructions, software comparison, and 20 FAQs

Per-Wallet Cost Basis Guide →

6. COIN Stock Down 68% — Tax-Loss Harvesting Opportunity

This section is for investors who hold COIN stock (not just crypto on Coinbase). With COIN trading at $141 — down 68% from its $444 all-time high — there's a significant tax-loss harvesting opportunity.

Purchase Price	Current Price	Loss per Share	100 Shares Loss
$444 (ATH)	$141	‑$303	‑$30,300
$350	$141	‑$209	‑$20,900
$250	$141	‑$109	‑$10,900
$200	$141	‑$59	‑$5,900

⚠️ IMPORTANT: Wash Sale Rule APPLIES to COIN Stock
Unlike crypto, COIN is a publicly traded stock. The wash sale rule applies. If you sell COIN at a loss, you cannot repurchase it within 30 days before or after the sale — or the loss is disallowed. This is the opposite of crypto, where the wash sale rule does not currently apply.

Strategy: COIN Losses Can Offset Crypto Gains

Here's where it gets powerful: Capital losses from COIN stock can offset capital gains from crypto sales. If you have $20,000 in crypto gains and $20,000 in COIN stock losses, they cancel out — $0 tax. Any excess loss up to $3,000 offsets ordinary income. Remaining losses carry forward to future years.

📉 Crypto Tax-Loss Harvesting Guide

BTC down 48% from ATH — learn the complete strategy

Tax-Loss Harvesting Mega Guide →

7. 5-Step Action Plan Before April 15

Step 1: Receive and Review Your 1099-DA (By Feb 17)

Check your Coinbase account → Tax Documents section. Download the 1099-DA when available. Review every transaction listed. Flag any that show $0 cost basis — these need manual correction.

Step 2: Export Your Full Transaction History

Go to Coinbase → Settings → Taxes → Download Reports. Export your complete transaction history CSV. This includes transfers, staking rewards, and trades that may not appear on the 1099-DA.

Step 3: Import into Crypto Tax Software

Use a dedicated crypto tax tool to calculate your actual cost basis per wallet:

Software	Per-Wallet Tracking	Spec ID / HIFO	Starting Price
CoinTracker	✅	✅	$59/yr (100 txns)
Koinly	✅	✅	$49/yr (100 txns)
CoinLedger	✅	✅	$49/yr
TaxBit	✅	✅	Free (basic)
Awaken Tax	✅	✅	$50/yr

Step 4: Reconcile 1099-DA with Your Records

Compare the 1099-DA gross proceeds against your tax software's output. If numbers don't match, use Form 8949 Column (e) to explain the difference. Common reasons for mismatch: transferred-in crypto ($0 basis on 1099-DA), missing staking rewards, fee calculations.

Step 5: File Form 8949 + Schedule D

Report all crypto disposals on Form 8949. Use Column (f) Code B for short-term and Code E for long-term if cost basis was NOT reported on the 1099-DA. Transfer totals to Schedule D. If you have COIN stock losses, report those on a separate 8949 from your broker's 1099-B.

✅ Pro Tip: If you have more than 50 crypto transactions, most tax software generates the Form 8949 automatically. You can attach it as a supporting PDF to your tax return. TurboTax, H&R Block, and FreeTaxUSA all accept crypto tax software imports.

8. FAQ: 15 Critical Questions About Coinbase Q4 and Your Taxes

Q1: Did Coinbase actually lose $667 million?

Yes, on a GAAP (Generally Accepted Accounting Principles) basis. However, $718M came from unrealized crypto portfolio losses and $395M from strategic investment declines. On an adjusted basis, the core business generated $178M in net income and $566M in EBITDA.

Q2: Is Coinbase in financial trouble?

No. Coinbase holds $11.3 billion in cash and cash equivalents, repurchased $1.7 billion of its own stock, and has $2.3 billion remaining in buyback authorization. The company guided Q1 2026 transaction revenue of approximately $420M through Feb 10.

Q3: When will I receive my Coinbase 1099-DA?

The IRS deadline for brokers to deliver 1099-DA to taxpayers is February 17, 2026. Check your Coinbase account under Settings → Tax Documents. It may also arrive by mail or email.

Q4: Does the Coinbase 1099-DA include cost basis?

Not for 2025 transactions. The 1099-DA only reports gross proceeds this year. Cost basis reporting becomes mandatory for "covered" digital assets starting with transactions on or after January 1, 2026. IRS Source →

Q5: What happens if I just file using the 1099-DA numbers?

The IRS will treat your sale proceeds as 100% gain because no cost basis is shown. For example, selling 1 BTC at $66,000 would appear as a $66,000 taxable gain with a $15,840 tax bill at 24%. You must report your own cost basis on Form 8949.

Q6: What about crypto I transferred into Coinbase from another wallet?

Coinbase cannot track cost basis for transferred-in crypto. The 1099-DA will show $0 basis for these assets. You must use records from the original purchase platform to determine and report the correct cost basis.

Q7: Can I use HIFO (Highest In, First Out) on Coinbase?

Coinbase's default reporting may use FIFO, but you can elect Specific Identification (which includes HIFO) on your tax return. The key is proper documentation showing which specific lots you sold. Crypto tax software like CoinTracker and Koinly automate this.

Q8: I hold COIN stock at a loss. Can I harvest the loss?

Yes, but the wash sale rule applies to stocks. If you sell COIN at a loss, you cannot repurchase COIN (or a "substantially identical" security) within 30 days before or after the sale. COIN losses can offset crypto gains and up to $3,000 of ordinary income.

Q9: Does the wash sale rule apply to my crypto on Coinbase?

As of this writing (February 2026), the wash sale rule does not apply to cryptocurrency. You can sell BTC at a loss and buy it back immediately. However, Congress has proposed extending the rule to crypto — this could change in a future tax year.

Q10: What is the per-wallet cost basis rule?

Starting January 1, 2025, under Revenue Procedure 2024-28, you can no longer pool cost basis across all your wallets. Each exchange or wallet is treated as a separate tax account with its own cost basis tracking. IRS Rev. Proc. 2024-28 →

Q11: My 1099-DA shows transactions I don't recognize. What do I do?

This could be from automated conversions, staking rewards, or referral bonuses. Log into Coinbase and review your full transaction history. If you believe transactions are incorrect, contact Coinbase support and document everything before filing.

Q12: Does Coinbase report to the IRS even if I don't get a 1099-DA?

Yes. Coinbase files the 1099-DA with the IRS regardless of whether you receive your copy. You are still obligated to report all crypto transactions. Not receiving the form is not a valid excuse for not reporting.

Q13: Are Coinbase staking rewards taxable?

Yes. Staking rewards are taxable as ordinary income at fair market value when received. The cost basis for future sale is the FMV at the time the reward was issued. Coinbase earned $152M in blockchain rewards revenue in Q4, down 18% QoQ.

Q14: What about international reporting — CARF 2027?

Starting 2027, the Crypto Asset Reporting Framework (CARF) will enable 48 countries to automatically exchange crypto transaction data. U.S. taxpayers using offshore exchanges will face much tighter scrutiny. Coinbase, as a U.S.-regulated exchange, already reports to the IRS. CARF 2027 Guide →

Q15: Should I switch from Coinbase to another exchange for tax purposes?

Switching exchanges doesn't solve the tax problem — it creates more complexity. Every transfer between exchanges is a potential tracking event. The real solution is proper documentation and per-wallet cost basis tracking using crypto tax software, regardless of which exchange you use.

📚 Related Guides

Per-Wallet Cost Basis Migration Guide

The IRS killed universal tracking. Step-by-step migration with software comparison and 20 FAQs.

Read Guide →

Bitcoin Tax-Loss Harvesting Mega Guide 2026

BTC down 48% from ATH. Turn this crash into thousands in tax savings while the wash sale loophole is still open.

Read Guide →

CARF 2027: IRS Enforcement Playbook for US Expats

48 countries will share your crypto data starting 2027. Offshore accounts are no longer hidden.

Read Guide →

SEC + CFTC "Project Crypto" 2026

How the single rulebook changes your staking and DeFi taxes.

Read Guide →

🔔 Stay Ahead of IRS Changes

New crypto tax rules drop every month. Get our guides delivered free.

Browse All Guides at Legal Money Talk →

Disclaimer: This article is for informational and educational purposes only. It does not constitute tax, legal, or financial advice. Tax laws are complex, change frequently, and vary by jurisdiction. Consult a qualified tax professional (CPA, tax attorney, or enrolled agent) before making any tax-related decisions. The author and Legal Money Talk are not responsible for any actions taken based on this content. All financial figures are based on publicly available data from Coinbase's Q4 2025 shareholder letter filed February 12, 2026. Cryptocurrency investments carry significant risk, including the risk of total loss. Past performance is not indicative of future results.

Per-Wallet Cost Basis 2026: The New IRS Rule That Changes Everything for Crypto Investors — Complete Migration Guide Before 1099-DA Deadline

DC

Davit Cho

Global Asset Strategist & Crypto Tax Compliance Expert

📊 Verified Against: IRS Final Regulations (TD 10000), Revenue Procedure 2024-28, CoinTracker 2026 Tax Guide, Fidelity Digital Assets Report
📅 Published: February 13, 2026  |  Last Updated: February 13, 2026
✉️ Contact: davitchh@proton.me

⚡ 13+ years experience in Global Asset Strategy & International Tax Enforcement

 

Per-Wallet Cost Basis 2026: The New IRS Rule That Changes Everything for Crypto Investors

On January 1, 2025, the IRS quietly ended the most popular method of tracking crypto cost basis. If you missed it, you're already behind — and the consequences hit your 2025 tax return filed this April.

The "Universal Method" is dead. Per-wallet cost basis tracking is now mandatory.

Under Revenue Procedure 2024-28, the IRS now requires every crypto investor to calculate cost basis separately for each wallet and exchange — Coinbase, Kraken, MetaMask, Ledger, Binance — each one is its own isolated cost basis universe.

If you don't designate which specific units you're selling at the time of each transaction, the IRS defaults to FIFO (First-In, First-Out) — which in a market where Bitcoin has crashed from $109,000 to ~$66,000, means you're selling your cheapest coins first and paying maximum taxes on gains that barely exist.

🚨 Critical Deadline: February 17, 2026

U.S. crypto brokers must send you Form 1099-DA by February 17, 2026 — just 4 days from now. This is the first year this form exists. For 2025 transactions, it reports gross proceeds only. Starting January 1, 2026, brokers will also report cost basis — and if you haven't set up per-wallet tracking, the broker defaults to FIFO, potentially inflating your taxable gains by thousands.

Source: IRS Newsroom — Reminders for Taxpayers About Digital Assets (January 28, 2026)

This guide is the complete migration playbook: what changed, why it costs you money, how to switch to Specific Identification (HIFO) before each sale, and the exact software setup to stay compliant. As of February 13, 2026, Bitcoin is trading at approximately $66,000 — down 48% from its all-time high of $109,000 — making cost basis strategy more critical than ever.

📑 Table of Contents

• → Section 1: What Changed — Universal Method Is Dead
• → Section 2: Per-Wallet Cost Basis Explained (With Examples)
• → Section 3: Universal vs Per-Wallet — Before & After Comparison
• → Section 4: The FIFO Trap — How Default Rules Cost You Thousands
• → Section 5: Step-by-Step Migration Guide (Rev. Proc. 2024-28)
• → Section 6: Crypto Tax Software Comparison for Per-Wallet Tracking
• → Section 7: The 1099-DA Connection — What Brokers Report in 2026
• → Section 8: 7 Common Mistakes That Trigger IRS Audits
• → Section 9: FAQ — 20 Critical Questions Answered

Section 1: What Changed — Universal Method Is Dead

Before January 1, 2025, most crypto investors used the "Universal Method" — a single pool of cost basis across all wallets and exchanges. If you bought 1 BTC on Coinbase for $30,000 and another 1 BTC on Kraken for $60,000, the Universal Method treated them as one pool with an average basis of $45,000 per BTC.

That's over.

Under IRS Final Regulations (Treasury Decision 10000) published June 28, 2024, and Revenue Procedure 2024-28 released the same day, the IRS mandated that starting January 1, 2025:

• Cost basis must be tracked separately per wallet and per exchange account
• The Universal Method (pooling across wallets) is no longer permitted
• If you don't specify which units you're selling, the IRS applies FIFO by default within each wallet
• Taxpayers had until December 31, 2024 to use the Safe Harbor provision to allocate existing "unused basis" across wallets

⚠️ If You Missed the December 31, 2024 Safe Harbor Deadline

You're not out of options — but you've lost the ability to choose how to allocate your existing basis. The IRS will default to FIFO within each wallet for all pre-2025 holdings. This could mean higher taxes if your oldest purchases have the lowest basis. Consult a crypto-specialized CPA immediately if you have significant holdings across multiple wallets.

📄 Read: 1099-DA Crypto Tax Form 2026 — First Year Guide →

Section 2: Per-Wallet Cost Basis Explained (With Examples)

Under the new per-wallet system, every wallet and exchange account is treated as an isolated tax lot universe. Here's what that means in practice:

📊 Example: Sarah's 3-Wallet BTC Portfolio

Wallet/Exchange	BTC Held	Purchase Price	Cost Basis per BTC
Coinbase	0.5 BTC	Bought at $30,000 (2022)	$30,000
Kraken	0.5 BTC	Bought at $95,000 (Jan 2025)	$95,000
Ledger (Hardware)	1.0 BTC	Transferred from Coinbase (originally $30,000)	$30,000

Old Universal Method: Sarah's total pool = 2 BTC with blended average basis of $46,250 per BTC. If she sells 0.5 BTC at $66,000, gain = $19,750.

New Per-Wallet Method: If Sarah sells 0.5 BTC from Coinbase, basis = $30,000, gain = $36,000. If she sells 0.5 BTC from Kraken, basis = $95,000, loss = -$29,000.

💡 The Strategic Insight

Under per-wallet rules, which wallet you sell from completely changes your tax outcome. Selling from Kraken generates a $29,000 tax loss. Selling from Coinbase creates a $36,000 taxable gain. Same asset, same sale price — wildly different tax results. This is why per-wallet awareness is now critical for every single crypto sale.

🔥 Read: Bitcoin Down 50% — Tax-Loss Harvesting Mega Guide 2026 →

Section 3: Universal vs Per-Wallet — Before & After Comparison

Factor	Universal Method (Before 2025)	Per-Wallet Method (2025+)
Cost Basis Pool	All wallets merged into one pool	Each wallet/exchange = separate pool
FIFO Default	Applied across all holdings globally	Applied within each individual wallet
Specific ID (HIFO)	Pick any lot from any wallet	Can only pick lots within the selling wallet
Transfer Between Wallets	No tax impact (same pool)	Cost basis must travel with the asset
Complexity	Low — one spreadsheet	High — requires software per wallet
Tax Optimization	Easier to cherry-pick lots	Requires pre-sale planning per wallet
IRS Authority	Permitted until Dec 31, 2024	Rev. Proc. 2024-28 + TD 10000

🔄 Read: Crypto Wash Sale Rules 2026 — No 30-Day Waiting Period →

Section 4: The FIFO Trap — How Default Rules Cost You Thousands

FIFO (First-In, First-Out) is the IRS default if you don't specifically identify which units you're selling. Under FIFO, the oldest units in each wallet are sold first — and for most crypto investors who started buying in 2020-2022, those are the cheapest units, meaning maximum taxable gains.

💰 Real Example: The FIFO Tax Penalty

Scenario: Mike holds 2 BTC on Coinbase. He sells 1 BTC on February 13, 2026 at $66,000.

Lot	Purchase Date	Cost Basis	Sale Price	Gain / Loss
Lot A (FIFO Default)	March 2021	$35,000	$66,000	+$31,000 gain
Lot B (Specific ID / HIFO)	October 2025	$109,000	$66,000	-$43,000 loss

🚨 The $74,000 Swing

FIFO default = $31,000 taxable gain → at 37% bracket = $11,470 in taxes owed

Specific ID (HIFO) = $43,000 deductible loss → offsets other gains + $3,000 ordinary income deduction → potential $15,910 in tax savings

Total swing: $27,380 in real tax dollars — just by choosing which lot to sell. Same BTC. Same sale price. Different lot = completely different tax outcome.

According to CoinTracker's 2026 tax guide, taxpayers who use Specific Identification (HIFO) instead of FIFO save an average of $5,600 per year in crypto taxes. For high-volume traders, the savings can exceed $50,000 annually.

📈 Read: Crypto Day Trading Taxes 2026 — IRS Rules for Active Traders →

Section 5: Step-by-Step Migration Guide (Rev. Proc. 2024-28)

Whether you used the Safe Harbor before December 31, 2024 or not, here's the complete workflow for filing your 2025 taxes correctly under the new per-wallet rules:

✅ Step 1: Inventory Every Wallet and Exchange Account

List every location where you hold or held crypto in 2025. This includes centralized exchanges (Coinbase, Kraken, Gemini, Binance.US), foreign exchanges (Binance.com, Bybit, OKX), hardware wallets (Ledger, Trezor), software wallets (MetaMask, Phantom, Trust Wallet), and DeFi protocols where you deposited or staked tokens.

✅ Step 2: Export Full Transaction History From Each Wallet

For each exchange, download the complete 2025 transaction CSV. For self-custody wallets, export from the relevant block explorer (Etherscan, Solscan, Blockchain.com). Include all trades, swaps, staking rewards, airdrops, and transfers.

✅ Step 3: Import Into Per-Wallet-Compatible Tax Software

Use software that supports per-wallet cost basis tracking. Import each wallet separately. The software must maintain isolated cost pools per wallet — not merge them.

✅ Step 4: Choose Your Cost Basis Method Per Wallet

For each wallet, you can choose:

Method	How It Works	Best For	Tax Impact
FIFO (Default)	Sell oldest units first	Almost no one — worst for tax efficiency	Highest taxes (sells cheapest lots first)
HIFO (via Spec-ID)	Sell highest-cost units first	Most investors — minimizes gains	Lowest taxes (sells most expensive lots first)
LIFO	Sell newest units first	Short-term loss harvesting	Varies — good in rising markets
Specific Identification	Choose exact lot per trade	Advanced traders, CPAs	Maximum flexibility

✅ Step 5: Track Transfers Between Wallets

When you transfer crypto from one wallet to another (e.g., Coinbase → Ledger), the cost basis must travel with the asset. A transfer is not a taxable event, but you must document the cost basis of each unit transferred. This is the #1 area where investors make mistakes under the new rules.

✅ Step 6: Generate Form 8949 and Schedule D

Your crypto tax software will generate Form 8949 (individual transactions) and Schedule D (summary). For 2025 returns, use Box C (short-term, no 1099-DA) or Box F (long-term, no 1099-DA) for foreign exchange and self-custody wallet transactions. For U.S. exchange transactions where you received a 1099-DA, use Box A or Box D.

✅ Step 7: Reconcile Against 1099-DA (If Received)

Starting February 17, 2026, U.S. brokers will send Form 1099-DA. For 2025 transactions, this form reports gross proceeds only (not cost basis). Compare this against your own calculations. If there's a discrepancy, attach an explanation statement to your return.

💡 Pro Tip: The "Covered vs Uncovered" Distinction

Starting January 1, 2026, crypto purchased and held within the same broker account becomes a "covered security." Brokers must then report cost basis to the IRS. Any crypto acquired before 2026, or held in a different wallet from where it was purchased, is "uncovered" — meaning you are responsible for calculating and reporting cost basis. This distinction becomes critical for your 2026 transactions (filed in 2027).

⚠️ Read: DeFi Users — Form 8949 Mismatch = Automatic Audit in 2026 →

Section 6: Crypto Tax Software Comparison for Per-Wallet Tracking

Not all crypto tax software handles per-wallet tracking correctly. Here's the 2026 comparison focused specifically on Rev. Proc. 2024-28 compliance:

Software	Per-Wallet Tracking?	HIFO Support?	Transfer Basis Tracking?	Pricing (2026)
CoinTracker	✓ YES (Native)	✓ YES	✓ YES	$59–$1,999/yr
Koinly	✓ YES (Updated)	✓ YES	✓ YES	$49–$999/yr
CoinLedger	✓ YES (Updated)	✓ YES	✓ YES	$49–$299/yr
TaxBit	✓ YES	⚠ Limited	✓ YES	$50–$500/yr
Awaken Tax	✓ YES	✓ YES	✓ YES	$99–$599/yr

💡 Our Recommendation

For most investors: CoinTracker or Koinly — both have native per-wallet tracking, HIFO support, and handle transfer basis correctly. Koinly is slightly cheaper; CoinTracker integrates better with TurboTax.

For DeFi-heavy users: Koinly or Awaken Tax — better at parsing complex DeFi interactions (liquidity pools, yield farming, cross-chain bridges).

For high-volume traders (1,000+ transactions): CoinTracker Ultra or TaxBit Enterprise — built for scale and CPA collaboration.

⚖️ Read: Best Crypto Tax Software 2026 — Full Comparison →

Section 7: The 1099-DA Connection — What Brokers Report in 2026

Form 1099-DA is the IRS's new weapon for crypto tax enforcement, and it's directly linked to the per-wallet cost basis rule. Here's the timeline:

Tax Year	Form Sent	What Brokers Report	Your Action
2025 (Current)	By Feb 17, 2026	Gross proceeds ONLY (no cost basis)	Self-calculate cost basis per wallet
2026 (Next Year)	By Feb 2027	Gross proceeds + Cost basis (covered assets only)	Reconcile broker basis with your records
2027+ (CARF Era)	By Feb 2028	All data + Foreign exchange auto-reporting	Full reconciliation across domestic + foreign

⚠️ The 1099-DA Cost Basis Trap for 2026

Starting January 1, 2026, brokers will default to FIFO for cost basis reporting on covered assets unless you explicitly tell them otherwise. If you don't log into Coinbase, Kraken, or Gemini before your first 2026 sale and select "Specific Identification" as your accounting method, the broker will lock in FIFO — and the 1099-DA sent to the IRS will reflect FIFO calculations. Correcting this after the fact is extremely difficult.

🌍 Read: CARF 2027 — IRS CEO Bisignano's Enforcement Playbook for US Expats →

Section 8: 7 Common Mistakes That Trigger IRS Audits

These are the most frequent errors IRS agents flag when reviewing crypto returns under the new per-wallet rules:

❌ Mistake #1: Still Using Universal Method for 2025 Returns

The Universal Method ended December 31, 2024. Filing your 2025 return with pooled cross-wallet basis is non-compliant and will trigger a mismatch if the IRS compares your return against broker-reported data.

❌ Mistake #2: Not Tracking Basis on Wallet-to-Wallet Transfers

When you move BTC from Coinbase to Ledger, the cost basis must follow. If your Ledger shows $0 basis because you didn't track the transfer, you'll report 100% of the sale as gain — massively overpaying taxes.

❌ Mistake #3: Ignoring Foreign Exchange Transactions

Binance.com, Bybit, and OKX don't send 1099-DA, but the IRS can trace your transactions via blockchain analytics. Every foreign exchange transaction requires self-reporting on Form 8949 with per-wallet basis calculated independently.

❌ Mistake #4: Defaulting to FIFO Without Realizing It

If you don't explicitly select Specific Identification (HIFO) before each sale, the IRS applies FIFO. For someone who bought BTC at $20,000 in 2022 and $100,000 in 2025, FIFO sells the $20,000 lot first — creating a taxable gain even if the current price is below your latest purchase.

❌ Mistake #5: Missing Staking, Airdrop, and DeFi Income

Staking rewards and airdrops received in any wallet have a cost basis equal to their fair market value at the time of receipt. These must be tracked per wallet as ordinary income — and then separately as capital gain/loss when sold.

❌ Mistake #6: Inconsistent Method Across Tax Years

If you used FIFO in 2024 but switch to HIFO in 2025 without proper documentation, the IRS may challenge your basis calculations. Maintain a written record of your chosen method for each wallet, each year.

❌ Mistake #7: Not Reconciling 1099-DA With Self-Calculated Basis

When your 1099-DA arrives (by Feb 17), compare the gross proceeds figure against your crypto tax software output. Any mismatch — even small — can auto-flag your return in the IRS matching system.

🚨 Read: IRS Crypto Audit Red Flags 2026 — How to Avoid Getting Flagged →

Section 9: FAQ — 20 Critical Questions Answered

❓ Q1: What is per-wallet cost basis?

It means you must calculate cost basis separately for each wallet and exchange account. BTC on Coinbase has one basis; BTC on Ledger has another — even if it's the same Bitcoin.

❓ Q2: When did the Universal Method end?

December 31, 2024. Starting January 1, 2025, per-wallet tracking is mandatory under Rev. Proc. 2024-28.

❓ Q3: What is the Safe Harbor, and is it too late?

The Safe Harbor allowed you to allocate existing "unused basis" across your wallets by December 31, 2024. If you missed it, the IRS defaults to FIFO within each wallet for pre-2025 holdings.

❓ Q4: What happens if I don't specify which lot I'm selling?

The IRS applies FIFO — the oldest lot in that specific wallet is sold first. In a crash market, this typically means selling your cheapest lots and paying maximum taxes on gains.

❓ Q5: Can I use HIFO for crypto?

HIFO (Highest-In, First-Out) is a form of Specific Identification. The IRS allows Specific Identification if you designate the specific units being sold at or before the time of the transaction. Most crypto tax software does this automatically when you select HIFO.

❓ Q6: Does a wallet-to-wallet transfer trigger taxes?

No. Transfers between your own wallets are not taxable events. However, the cost basis must travel with the asset, and you must document the transfer to avoid losing basis information.

❓ Q7: How do I track basis on DeFi protocols?

DeFi interactions (swaps on Uniswap, deposits into Aave, LP token minting) each create separate taxable events. Your DeFi wallet address is a separate cost basis pool. Use Koinly or Awaken Tax, which have the best DeFi parsing engines.

❓ Q8: What about NFTs — are they per-wallet too?

Yes. NFTs are digital assets and subject to the same per-wallet rules. Each NFT in each wallet has its own cost basis. NFTs are taxed as collectibles at up to 28% for long-term holdings.

❓ Q9: Does the per-wallet rule apply to staking rewards?

Yes. Staking rewards received in a wallet have a cost basis equal to FMV at receipt. That basis is tied to that specific wallet. If you later move staked tokens to another wallet, the basis must follow.

❓ Q10: Can I change my cost basis method mid-year?

You can use different methods for different wallets. However, within a single wallet, you should be consistent throughout the tax year. Document any changes.

❓ Q11: What if my exchange doesn't support Specific ID?

Export your data to a crypto tax tool that does. CoinTracker, Koinly, and CoinLedger all allow you to apply HIFO/Specific ID regardless of what the exchange supports natively.

❓ Q12: How does this affect tax-loss harvesting?

Per-wallet rules make tax-loss harvesting more strategic. You must harvest from the specific wallet that holds the high-basis lots. You can't sell "your overall BTC position at a loss" — you sell specific lots in specific wallets.

❓ Q13: What about crypto in retirement accounts (IRA/401k)?

Crypto held in tax-advantaged retirement accounts (self-directed IRAs) is not subject to annual capital gains reporting. However, distributions are taxed as ordinary income. The per-wallet rule applies to taxable accounts only.

❓ Q14: Does this apply to Bitcoin ETFs (IBIT, FBTC)?

No. Bitcoin ETF shares are treated like stocks and reported on standard 1099-B forms. The per-wallet rule applies to direct crypto holdings only — coins in wallets and exchanges.

❓ Q15: What if I used a spreadsheet — is that acceptable?

Technically yes, if it accurately tracks per-wallet basis with dates, amounts, and lot identification. In practice, the IRS prefers software-generated reports. A spreadsheet with errors is a fast path to audit.

❓ Q16: Do the wash sale rules apply to crypto yet?

As of February 2026, crypto is still exempt from wash sale rules. You can sell BTC at a loss and immediately repurchase. However, Congress may close this loophole. Track legislative changes carefully.

❓ Q17: I have crypto on 10+ exchanges. How do I manage this?

Use CoinTracker or Koinly to import all 10+ exchanges simultaneously. The software maintains separate cost pools automatically. Consolidating to fewer exchanges reduces complexity going forward.

❓ Q18: What's the penalty for incorrect cost basis?

A 20% accuracy-related penalty on the underpayment (26 U.S.C. § 6662). If the IRS determines fraud, the penalty increases to 75%. Good-faith efforts documented with software logs provide strong penalty protection.

❓ Q19: Should I consolidate all crypto into one wallet?

From a tax simplification standpoint, yes — fewer wallets = fewer cost pools to track. From a security standpoint, no — diversification across wallets reduces hack risk. Balance both.

❓ Q20: Where can I read the actual IRS guidance?

Revenue Procedure 2024-28: irs.gov/pub/irs-drop/rp-24-28.pdf
Treasury Decision 10000: IRS Final Regulations for Digital Asset Reporting
IRS Digital Assets Page: irs.gov/filing/digital-assets

⚖️ Legal Disclaimer

This article is provided for educational and informational purposes only and does not constitute legal, tax, or financial advice. Tax laws are complex and change frequently. Davit Cho and LegalMoneyTalk do not provide personalized tax advice. Always consult a qualified CPA, Enrolled Agent, or tax attorney before making tax-related decisions. Information is verified against IRS Rev. Proc. 2024-28, Treasury Decision 10000, CoinTracker and Koinly 2026 guides, and Fidelity Digital Assets reports as of February 13, 2026.

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⚠️ 1099-DA Deadline: February 17, 2026 — 4 Days Left

Your broker is about to send Form 1099-DA to you and the IRS. If your per-wallet cost basis isn't set up, the IRS gets FIFO numbers — and you pay maximum taxes. Act now.

📄 Read the 1099-DA Survival Guide Now

Questions? Email Davit Cho at davitchh@proton.me
Published: February 13, 2026 | Last Updated: February 13, 2026