Form 1099-DA: Frequently Asked Questions for Brokers Navigating Digital Asset Tax Reporting
The IRS are ushering in a new era of tax information reporting for digital asset transactions as part of Form 1099-DA requirements. As tax and regulatory oversight is increased to cover digital assets, brokers - including exchanges, platforms, and custodians, face new compliance obligations across due diligence and transactional reporting.
What is Form 1099-DA?
Form 1099-DA is the IRS tax information reporting form created specifically for digital asset transactions. Starting January 1, 2025 onward, brokers must collect key details regarding user due diligence information such as certified TINs, and their digital asset transactions (including cryptocurrencies and certain NFTs) to report on Form 1099-DA. Brokers must file to the IRS and users, with first filings due in 2026.
Who are in-scope brokers for Form 1099-DA filing?
Brokers will include centralized exchanges, wallet providers and custodians who facilitate digital asset sales or exchanges on behalf of customers. Form 1099-DA will be required for each digital asset sale effectuated on behalf of customers.
What are the key requirements and deadlines?
- Due Diligence (W-8/W-9 Collection): During 2025, brokers should ensure that due diligence and customer on-boarding process are compliant with US law and regulation. This includes collection of certified TINs and verification with the IRS Tin Matching Protocol as a best practice. Obtaining valid Forms W-8 and W-9 are a first step to ensuring compliance for Form 1099-DA regulations and avoid backup withholding of 24% and additional penalties and interest.
- Gross Proceeds tracking: From January 2025, Brokers begin tracking Gross Proceeds of digital asset sales with first reporting in 2026.
- Cost Basis tracking: From January 2026, Brokers begin tracking Cost Basis in addition to Gross Proceeds on digital asset sales. First reporting of Cost Basis information is made in 2027.
- Backup Withholding: IRS has extended transition relief for Brokers through 2027 backup withholding tax obligations for digital asset sales provided the broker collects a certified TIN and uses the IRS Tin Matching Program. This would obtaining a valid Form W-8 or W-9, simply gathering a TIN does not meet the requirements.
What information is collected on Form 1099-DA?
The IRS Form 1099-DA must include account due diligence information and transactional reporting of digital asset sales. Key information to be reported on Form 1099-DA includes (but not limited to):
- Payee name, address, and taxpayer identification number (from W-8/W-9)
- Broker information
- Digital asset name, and identifying details
- Date(s) of acquisition and sale
- Gross proceeds (2025 onward)
- Cost basis (2026 onward, for covered assets)
What is a Covered Security?
A covered asset refers to a digital asset acquired after the introduction of the IRS 1099-DA regulations (2025) for which cost basis or disposition information is required to be reported. A Covered Security is a digital asset acquired and disposed of by the same custodial broker.
What should Brokers start to do now?
The new Form 1099-DA regime marks a significant evolution in tax compliance for digital asset brokers. By focusing on robust due diligence (with valid W-8/W-9 forms and TIN matching as best practice), implementing automated workflow solutions, and staying on top of IRS timelines, brokers can ensure smooth compliance and minimise risks.
S&P Tax Solutions
S&P Tax Solutions is proud to work with some of the largest financial institutions and crypto exchanges in shaping and delivering their tax reporting compliance program.
The Tax Solutions at S&P Market Intelligence’s global tax ecosystem platform is a centralized solution to address all aspects of digital asset tax information compliance, including due diligence and tax withholding, transactional information gathering, cost basis tracking and tax information reporting for Form 1099-DA, CRS, CARF and DAC8.
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