Understanding IRS Form 1099-DA: What Each Box Means for Crypto Investors

The IRS has introduced Form 1099 DA, Digital Asset Proceeds From Broker Transactions, beginning with 2025 sales. This form represents the government’s most significant step toward treating digital assets in a manner that resembles traditional securities for reporting purposes. Each box on the form provides data to the IRS and to taxpayers. That data was often self reported or overlooked in the past.

Here is what you need to know about the reporting boxes, and how they change the tax landscape for digital asset investors.

Identification and Transaction Details

• Box 1a to 1c (DTIF code, asset name, units sold)
  The IRS now receives specific identifiers for each digital asset and the exact number of units sold. In the past, taxpayers could summarize or omit this detail. Now accuracy is enforced at the broker level.

• Box 1d to 1e (Date acquired and date sold or disposed)
  The holding period is automatically confirmed. This removes reliance on taxpayer records to determine whether a gain is short term or long term.

Proceeds, Basis, and Adjustments

• Box 1f (Proceeds)
  Reports gross proceeds whether cash, other crypto, or property. This eliminates ambiguity in crypto for crypto swaps that many taxpayers previously skipped reporting.

• Box 1g (Cost or basis)
  Where available, the broker reports cost basis directly. Taxpayers lose flexibility to choose among lots unless they document and instruct the broker.

• Box 1h (Accrued market discount)
  Ensures that any discount on debt like tokens is taxed as ordinary income rather than capital gain.

• Box 1i (Wash sale loss disallowed)
  Currently, wash sale rules do not apply to digital assets since they are classified as property rather than securities. However, this box is included to cover certain tokenized securities and to prepare for possible future legislation.

• Box 2 (Basis reported to IRS)
  If checked, the IRS already has the adjusted basis. This leaves little room for misreporting gains or losses.

Transaction Types

• Box 3a to 3b (Options and Qualified Opportunity Fund transactions)
  Flags transactions subject to special treatment, giving the IRS immediate visibility into deferrals and adjustments.

• Box 4 (Backup withholding)
  Discloses tax withheld when no valid taxpayer identification number was provided.

• Box 5 (Loss disallowed in reorganizations)
  Prevents taxpayers from improperly claiming losses in token reorganizations.

• Box 6 (Character of gain or loss)
  The IRS is informed whether a transaction is short term, long term, or ordinary. This removes taxpayer discretion.

Aggregate and NFT Reporting

• Box 11a to 11b (Stablecoins or NFT proceeds and transaction count)
  Captures lump sum proceeds and transaction volume. This makes it harder to ignore frequent trading.

• Box 11c (NFT creator or minter first sales)
  Specifically identifies first sales of NFTs created or minted by taxpayers. These are generally treated as ordinary income rather than capital gain.

Transfers and State Reporting

• Boxes 12a to 12b (Units transferred in and date)
  Allows the IRS to track assets moved from outside wallets into broker platforms. In the past these movements were invisible.

• Boxes 14 to 16 (State reporting)
  Digital asset transactions are now shared with state tax agencies, ensuring enforcement beyond federal filings.

Conclusion: More IRS Data, Less Taxpayer Flexibility

Form 1099 DA represents a turning point in how digital assets are reported. Where taxpayers once had wide discretion to self report basis, classify holding periods, or omit peer to peer swaps, brokers will now deliver that data directly to the IRS. This reduces flexibility and increases the likelihood that returns will be cross checked against IRS records.

For now, crypto still avoids the wash sale rule, but the presence of Box 1i is a clear signal. Lawmakers are preparing to close this gap. Investors should keep detailed records, align their reporting with broker issued forms, and expect that the IRS will have greater insight into every crypto transaction in the future.

Call to Action

The IRS is raising the stakes with Form 1099 DA, and crypto investors have less flexibility than ever before. Do not attempt to navigate these changes on your own. Schedule an appointment with me today to review your digital asset transactions, ensure your reporting aligns with the new IRS requirements, and create a tax strategy that will remain effective under the latest rules.