Bitcoin Crashed 49% From ATH — Here's What the IRS Expects You to Do Before April 15 (2026 Filing Guide)

On October 6, 2025, Bitcoin touched $126,198 — the highest price in its 17-year history. Five months later, it is trading below $65,000. That is a 49% drawdown, accelerated by President Trump's announcement of a 15% global tariff on February 21, 2026, just two days after the Supreme Court struck down his earlier tariff authority.

Meanwhile, something else landed in your inbox for the very first time: Form 1099-DA. This is Year One. Every trade you executed on Coinbase, Kraken, Gemini, or Robinhood in 2025 has been reported directly to the IRS — gross proceeds, transaction dates, and asset descriptions. The IRS matching computer is live. Your return is due April 15, 2026 — roughly 50 days from today.

Here is the problem: your 1099-DA almost certainly shows $0 cost basis for transferred assets. That means the IRS sees your entire sale as pure profit. If you do not fix this before you file, you will either overpay by thousands of dollars or trigger a CP2000 underreporter notice.

This guide walks you through everything the IRS expects you to do — and every legal strategy available to you — before that deadline hits.

Jump to the 7-Step Action Plan ↓

Quick Facts: The 2026 Crypto Tax Filing Landscape

Bitcoin All-Time High	$126,198 (Oct 6, 2025) — source
Current Price (Feb 24, 2026)	~$64,000 — down 49% from ATH
Crash Catalyst	Trump 15% global tariff (Feb 21, 2026) — CNBC
New Form This Year	Form 1099-DA — Year One of broker reporting to IRS
Cost Basis on 1099-DA?	NOT required for 2025 transactions; begins with 2026 sales
Filing Deadline	April 15, 2026 (extension: October 15, 2026)
Americans Holding Crypto	~65 million (28% of adults) — Frazier & Deeter
Wash Sale Rule for Crypto?	Does NOT apply (crypto = property, not security)
Capital Loss Deduction Cap	$3,000/year against ordinary income (unlimited carryforward)
Standard Deduction 2026	$16,100 single / $32,200 MFJ (OBBBA-adjusted) — IRS

Read: 50% of Crypto Holders Fear IRS Penalties →

What Just Happened: From $126K to $64K in Five Months

Bitcoin's parabolic run through 2025 was fueled by spot ETF inflows, the April 2024 halving cycle, and a crypto-friendly White House under President Trump. The price ripped from $67,000 in January 2025 to a record $126,198 on October 6, 2025, according to Investopedia.

Then the macro environment turned hostile. A series of trade-policy shocks began unwinding the rally. On February 21, 2026, the Supreme Court ruled 6-3 that Trump's earlier emergency tariffs exceeded his constitutional authority, per Bitcoin Magazine. Bitcoin briefly spiked on the news. Hours later, Trump signed a new executive order invoking a 1974 statute to impose a 15% global tariff for up to 150 days, as reported by CoinDesk. Bitcoin immediately reversed, falling 5% below $65,000 over the weekend.

The result: a 49% peak-to-trough drawdown. Prediction markets on Polymarket show a 61% probability that Bitcoin will fall below $50,000 at some point in 2026, per MEXC research. Barron's reports BTC is already down 25% since the start of 2026 alone.

For tax purposes, this crash creates a massive window of opportunity — and a minefield of compliance risk. Every sale you made in 2025 at prices between $67K and $126K is now locked into your 1099-DA. If you are sitting on unrealized losses in 2026, you can harvest them right now — and because the wash sale rule does not apply to crypto, you can re-buy immediately.

Warning: Even if your portfolio is deep in the red, the IRS still expects you to report every 2025 transaction. A loss does not excuse non-filing. The penalty for late filing is 5% of unpaid taxes per month, capped at 25%.

CNBC: Bitcoin Falls After Trump 15% Tariff →

Your 1099-DA Arrived. Now What?

Form 1099-DA is the crypto equivalent of the 1099-B that stock brokers have issued for decades. For the first time, the IRS receives a copy of every digital asset sale you executed through a U.S.-based exchange in 2025. The form was due to taxpayers by February 17, 2026, per IRS.gov.

The Basis Gap Problem

For tax year 2025, brokers are required to report gross proceeds only — not cost basis. Cost basis reporting is mandatory starting with transactions executed on or after January 1, 2026, per the IRS final regulations. This means your 2025 Form 1099-DA will show how much you sold for — but not how much you originally paid.

The risk is enormous. If you transferred 2 BTC from a Ledger hardware wallet to Coinbase and sold for $200,000, Coinbase reports $200,000 in gross proceeds to the IRS with no cost basis attached. The IRS automated matching program treats missing basis as $0 basis — meaning it sees a $200,000 capital gain. If your actual cost basis was $150,000, you should owe tax on only $50,000. But the IRS does not know that unless you tell them on Form 8949.

The Reconciliation Trap

The IRS matching system compares your Form 1040, Schedule D, and Form 8949 against every 1099-DA filed by brokers. A mismatch triggers a CP2000 notice — an automated letter proposing additional tax, penalties, and interest. According to a CPA's analysis on Reddit, the most common mistake is failing to include transactions from a 1099-DA on your return, or reporting different gross proceeds than what the broker filed.

Delayed Forms Add Pressure

Major exchanges including Coinbase and Kraken have reported significant delays in issuing 1099-DA forms, with some taxpayers not receiving their forms until March 18 or later, per Kugelman Law. If your form arrives mid-March, you have less than 30 days to reconcile potentially hundreds of transactions before April 15.

Key Point: The 1099-DA reports gross proceeds to the IRS. YOU are responsible for providing the correct cost basis on Form 8949. If you do not, the IRS assumes $0 basis and taxes your entire sale as gain.

IRS: About Form 1099-DA → Our Guide: IRS Form 8949 for Crypto →

Your 7-Step Crypto Tax Action Plan Before April 15

1

Gather Every 1099-DA From Every Exchange

Log into each platform where you traded in 2025: Coinbase, Kraken, Gemini, Robinhood, Binance.US, Crypto.com. Download every 1099-DA issued to you. If you used a decentralized exchange (Uniswap, dYdX), those platforms do not issue 1099-DAs — you are solely responsible for reporting those transactions. Cross-reference your exchange transaction histories with your 1099-DA forms to ensure nothing is missing.

2

Check for Missing or Delayed Forms

Coinbase and Kraken have notified some users that their 1099-DA may arrive as late as March 18, 2026. If your form has not arrived, do not wait — log into your account and download your full transaction history as a CSV file. This data is your backup for reconstructing the information manually or through crypto tax software.

3

Reconstruct Cost Basis for Transferred Assets

This is the most critical step. For any crypto that was transferred from a personal wallet, another exchange, or a DeFi protocol before being sold, you must establish the original purchase date and price. Dig up old exchange confirmations, email receipts, blockchain explorer records (Etherscan, Blockchain.com), and wallet transaction logs. If you cannot find the original purchase records, use the fair market value on the date you received the asset as your cost basis, per Koinly's cost basis guide.

4

Choose Your Accounting Method — And Stick With It

You must select an accounting method for identifying which lots are sold: FIFO (First In, First Out) is the IRS default, LIFO (Last In, First Out) sells your newest purchases first, and HIFO (Highest In, First Out) sells your most expensive lots first, minimizing taxable gain. Example: If you bought 1 BTC at $30K, 1 BTC at $60K, and 1 BTC at $100K, then sold 1 BTC for $65K — FIFO shows a $35K gain, LIFO shows a $5K gain, and HIFO shows a $35K loss. The method you choose must be applied consistently. Note that beginning with 2026 transactions, brokers will default to FIFO unless you provide specific lot identification instructions.

5

Identify Tax-Loss Harvesting Opportunities (No Wash Sale Rule)

With Bitcoin down 49% from its ATH, you may be holding significant unrealized losses in your 2026 portfolio. Because the wash sale rule under IRC §1091 does not apply to cryptocurrency — crypto is classified as property, not a security — you can sell at a loss and immediately re-purchase the same asset. This crystallizes the loss for tax purposes without changing your market exposure. Capital losses offset capital gains dollar-for-dollar, and excess losses offset up to $3,000 of ordinary income per year with unlimited carryforward. See our Tax-Loss Harvesting Guide for full strategies.

6

Run Form 8949 + Schedule D Through Crypto Tax Software

Import your exchange CSVs and wallet addresses into CoinTracker, Koinly, or CoinLedger. These platforms auto-match transfers across wallets, reconstruct cost basis, and generate IRS-ready Form 8949 and Schedule D. Double-check the output against your 1099-DA to ensure gross proceeds match. Any discrepancy between your 8949 and the 1099-DA the IRS receives will be flagged by the automated matching program.

7

If Not Ready → File Form 4868 by April 15

If your 1099-DA is delayed, your basis is unresolved, or your transaction volume is simply too high to reconcile in time, file Form 4868 by April 15, 2026 for an automatic six-month extension to October 15, 2026. You can file electronically through IRS Free File at no cost. Critical: the extension applies to filing only — it does not extend the payment deadline. Estimate your tax liability and pay it by April 15 to avoid the 0.5% per month late-payment penalty.

Pro Tip: Even if you expect a refund, filing Form 4868 protects you from the 5%-per-month failure-to-file penalty if your calculations turn out to be wrong. It costs nothing and takes 5 minutes.

File Form 4868 Free on IRS.gov → Guide: Per-Wallet Cost Basis Tracking →

The Wash Sale Loophole: Still Open in 2026 (Maybe Not for Long)

The wash sale rule, codified in IRC §1091, prevents investors from claiming a tax loss if they buy a "substantially identical" security within 30 days before or after the sale. It applies to stocks, bonds, and other securities. It does not apply to cryptocurrency.

This is not a loophole in the casual sense — it is the plain text of the law. The IRS classifies crypto as property under Notice 2014-21, and property is not subject to wash sale restrictions. TurboTax confirmed this in their January 2026 guidance. CoinLedger, Kiplinger, and TokenTax all concur as of February 2026.

In practice, this means you can sell 1 BTC at a $30,000 loss on Monday, re-buy 1 BTC on Tuesday, and claim the $30,000 loss on your 2026 return. Your market position is unchanged; your tax bill drops by thousands. With stocks, this move would disallow the loss entirely.

Why This May Be the Last Year

Forbes reported in December 2025 that "2025 may be the last time taxpayers can take advantage" of the crypto wash sale gap. Multiple legislative proposals — including provisions discussed in the White House's digital asset recommendations — would extend wash sale rules to cover digital assets. The Cadwalader 2026 Crypto Tax Forecast specifically flags this as a high-probability legislative change. A discussion draft already proposes applying wash sale rules to cryptocurrency starting as early as 2027.

Bottom Line: The wash sale loophole is legal and available right now for 2025 and 2026 transactions. But smart investors are harvesting losses aggressively because this window may close. If you are sitting on unrealized losses from the current crash, consider acting before legislative action eliminates this advantage.

Full Guide: Crypto Tax-Loss Harvesting →

Capital Losses: How the Math Actually Works

The mechanics of capital loss deductions confuse many crypto investors, particularly the $3,000 annual limit. Here is exactly how the system works under current law.

When you sell crypto at a loss, the loss is classified as either short-term (held 1 year or less) or long-term (held more than 1 year). Short-term losses first offset short-term gains, which are taxed at your ordinary income rate of 10% to 37%. Long-term losses first offset long-term gains, which are taxed at preferential rates of 0%, 15%, or 20% depending on income. After netting within each category, any remaining net loss crosses over to offset the other category.

If your total capital losses exceed your total capital gains for the year, the excess loss offsets up to $3,000 of ordinary income ($1,500 if married filing separately). Any remaining loss carries forward indefinitely to future tax years — there is no expiration.

Example: 2025 Filing Scenario

Transaction	Type	Gain / Loss
Sold ETH bought 3 months ago	Short-term	+$8,000 gain
Sold BTC bought 2 months ago	Short-term	-$22,000 loss
Sold SOL bought 14 months ago	Long-term	+$5,000 gain
Net Short-Term		-$14,000
Net Long-Term		+$5,000
Overall Net Loss		-$9,000
Deduction against ordinary income (2025)		-$3,000
Carryforward to 2026		-$6,000

In this scenario, the investor pays zero capital gains tax and reduces their ordinary income by $3,000. The remaining $6,000 loss carries into 2026. Importantly, capital losses from crypto can offset stock gains — and vice versa. They are all reported on the same Schedule D.

Short-Term vs Long-Term Rates for 2025

Holding Period	Tax Rate	Applies To
≤ 1 year (short-term)	10% – 37% (ordinary income rates)	Day trades, swing trades, DeFi flips
> 1 year (long-term)	0% / 15% / 20%	Long-term HODL positions sold
Net Investment Income Tax	+3.8%	AGI above $200K single / $250K MFJ

For high-income taxpayers, the effective maximum rate on short-term crypto gains is 40.8% (37% + 3.8% NIIT). This is why harvesting losses against short-term gains produces the greatest tax savings — every dollar of short-term loss offsets income that would otherwise be taxed at up to 40.8%.

Compare: Best Crypto Tax Software →

Can't File by April 15? Your Form 4868 Extension Guide

If your 1099-DA has not arrived, your cost basis is a mess, or you simply need more time, filing Form 4868 is the single most important protective action you can take. Here is what it does and does not do.

What Form 4868 Does

Filing Form 4868 by April 15, 2026 gives you an automatic six-month extension to file your Form 1040, moving the deadline to October 15, 2026. You do not need a reason. You do not need IRS approval. The extension is automatic upon submission. You can file electronically through IRS Free File, through your tax software, or by mailing the paper form.

What Form 4868 Does NOT Do

It does not extend the payment deadline. You must estimate your total tax liability for 2025 and pay that amount by April 15. If you owe taxes and do not pay by the original deadline, the IRS charges a failure-to-pay penalty of 0.5% of the unpaid amount per month, plus interest at the federal short-term rate plus 3%. Per TurboTax, the failure-to-file penalty (5% per month, max 25%) is ten times worse than the failure-to-pay penalty — so even if you cannot pay in full, always file the extension.

Penalty Comparison

Scenario	Penalty	Monthly Rate	Maximum
Filed extension + paid on time	None	0%	$0
Filed extension + paid late	Failure-to-pay	0.5%/month	25%
No extension + filed late + paid late	Both penalties	5.5%/month combined	47.5%

Crypto-Specific Reason to Extend: If your Coinbase or Kraken 1099-DA is delayed until mid-March, rushing to file by April 15 with incomplete data creates mismatch risk. Filing an extension gives you until October 15 to properly reconcile every transaction and reconstruct missing cost basis.

File Form 4868 Free on IRS.gov →

Crypto Tax Software Comparison: 1099-DA Reconciliation Features

Given the complexity of the first 1099-DA filing season, crypto tax software is no longer optional for anyone with more than a handful of transactions. The three major platforms — CoinTracker, Koinly, and CoinLedger — all support 1099-DA reconciliation, but their capabilities differ in important ways.

Feature	CoinTracker	Koinly	CoinLedger
1099-DA Import	Yes (direct Coinbase sync)	Yes (CSV upload)	Yes (CSV upload)
Cross-Platform Basis Matching	Automatic transfer detection	Automatic transfer detection	Manual tagging
Accounting Methods	FIFO, LIFO, HIFO, ACB	FIFO, LIFO, HIFO, ACB	FIFO, LIFO, HIFO
Form 8949 Generation	Yes	Yes	Yes
Schedule D Generation	Yes	Yes	Yes
TurboTax Integration	Yes	Yes	Yes
DeFi / DEX Support	Extensive	Extensive	Good
NFT Support	Yes	Yes	Yes
Tax-Loss Harvesting Dashboard	Real-time	Yes (manual refresh)	Basic
Pricing (up to 1,000 txns)	$59/year	$49/year	$49/year

All three platforms generate IRS-ready Form 8949, but none of them generate Form 4684 (for theft losses) or Form 4797 (for abandonment). If you need to report stolen or worthless crypto, see our Bybit Hack 1-Year Tax Guide.

For the 2026 filing season specifically, the most important feature is cross-platform basis matching. If you transferred BTC from Kraken to Coinbase before selling, CoinTracker and Koinly can automatically detect the transfer and carry over the original cost basis. CoinLedger requires manual tagging but is $10 cheaper per year.

Full Review: Best Crypto Tax Software →

Frequently Asked Questions

What is Form 1099-DA and why did I receive one in 2026?

Form 1099-DA (Digital Asset Proceeds from Broker Transactions) is a new IRS form that crypto exchanges like Coinbase, Kraken, and Robinhood are required to issue beginning with tax year 2025. It reports gross proceeds from your crypto sales and exchanges directly to both you and the IRS. For 2025 transactions, brokers report gross proceeds only — cost basis reporting begins with 2026 transactions.

Why is cost basis missing on my 1099-DA?

For the 2025 tax year, brokers are not required to report cost basis on Form 1099-DA. Additionally, if you transferred crypto from a personal wallet or another exchange, the receiving platform has no record of your original purchase price. This creates a "basis gap" where the IRS may assume your cost basis is $0, making your entire sale appear as taxable gain. You must provide the correct basis on Form 8949.

Does the wash sale rule apply to crypto in 2026?

No. As of February 2026, the IRS wash sale rule under IRC §1091 applies only to stocks and securities. Cryptocurrency is classified as property, not a security, so the 30-day wash sale restriction does not apply. You can sell crypto at a loss and immediately re-purchase the same asset. However, legislative proposals exist that could change this — Forbes reported 2025 may have been the last year without a crypto wash sale rule.

How much crypto loss can I deduct per year?

Capital losses from crypto first offset your capital gains dollar-for-dollar with no limit. Any remaining net capital loss can offset up to $3,000 of ordinary income per year ($1,500 if married filing separately). Excess losses carry forward indefinitely to future tax years. There is no expiration on the carryforward.

What happens if I miss the April 15, 2026 deadline?

If you owe taxes and fail to file by April 15, 2026 without an extension, the IRS charges a failure-to-file penalty of 5% of unpaid taxes per month, capped at 25%. There is also a separate failure-to-pay penalty of 0.5% per month. Filing Form 4868 by April 15 gives you an automatic six-month extension to October 15, 2026, but you must still estimate and pay any taxes owed by April 15 to avoid the payment penalty.

Should I use FIFO, LIFO, or HIFO for my crypto cost basis?

FIFO (First In, First Out) is the IRS default method. LIFO (Last In, First Out) and HIFO (Highest In, First Out) may reduce your taxable gain if your most recent or highest-cost purchases are sold first. You must choose a method and apply it consistently across all your crypto transactions. Starting with 2026 transactions, brokers will default to FIFO for covered securities unless you provide specific lot identification instructions. Consult a CPA before switching methods.

Can crypto losses offset my stock gains?

Yes. The IRS treats all capital gains and losses together on Schedule D, regardless of asset class. A $10,000 crypto loss can offset a $10,000 stock gain, reducing your net capital gain to zero. This is one of the most powerful advantages of tax-loss harvesting during a crypto downturn.

What is a CP2000 notice and how does it relate to Form 1099-DA?

A CP2000 notice is an IRS automated underreporter notice triggered when the information on your tax return does not match the data reported by third parties. If your exchange reports $45,000 in gross proceeds on Form 1099-DA and you fail to include the transaction on Form 8949, the IRS will assume the full $45,000 is taxable gain and send you a CP2000 proposing additional tax, interest, and potential penalties.

How do I file a tax extension for crypto using Form 4868?

You can file Form 4868 electronically through IRS Free File, through your tax software (TurboTax, H&R Block), or by mailing the paper form. The deadline to submit is April 15, 2026. An approved extension moves your filing deadline to October 15, 2026. Important: an extension to file is NOT an extension to pay — estimate your tax liability and pay it by April 15 to avoid the 0.5% monthly late-payment penalty.

What is the standard deduction for 2026 and does it affect my crypto losses?

For tax year 2026, the standard deduction is $16,100 for single filers and $32,200 for married filing jointly (adjusted under the One Big Beautiful Bill Act). Capital losses from crypto are reported on Form 8949 and Schedule D regardless of whether you itemize or take the standard deduction — you do NOT need to itemize to claim capital losses. However, theft losses reported on Form 4684 do require itemizing on Schedule A.

Related Guides

Continue building your crypto tax knowledge with these in-depth resources from Legal Money Talk:

Bybit Hack 1-Year Later: Deduct Stolen Crypto → Crypto Tax Havens vs Traps: 0% to 55% → 50% of Crypto Holders Fear IRS Penalties → Best Crypto Tax Software 2025 → IRS Form 8949 Crypto Guide → Crypto Tax-Loss Harvesting Guide → Per-Wallet Cost Basis Tracking → IRS CP2000 Crypto Notice Guide → OECD CARF Overview →

Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex, change frequently, and vary by jurisdiction. The information presented reflects rules and guidance available as of February 24, 2026. Consult a qualified CPA, tax attorney, or enrolled agent before making any decisions based on this content. Legal Money Talk and its authors are not liable for actions taken based on this article. All external links are provided for reference only and do not constitute endorsements.

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.