their clients have navigated cryptocurrency reporting in something of a gray zone: technically obligated to self-report every taxable event yet largely operating without the kind of third-party verification infra structure that governs equities, bonds and other traditional financial instruments. That era is now over.

Form 1099-DA, the IRS s first-ever information return designed specifically for digital asset transactions, has arrived, and it has started to reshape how practitioners approach compliance, recordkeeping and client conversations.

What the Form Actually Does and Does Not Do 

Beginning with 2025 transactions, custodial brokers cryptocurrency exchanges, hosted wallet providers, payment processors and digital asset kiosks   are required to report gross proceeds from digital asset sales to both the IRS and to taxpayers annually by Feb. 17.

But here is where it has gotten complicated for practitioners. For 2025 transactions, brokers were not yet required to report cost basis. That means millions of taxpayers were holding 1099-DAs that reported proceeds without any corresponding basis information, effectively giving the IRS half the picture while leaving clients and their advisors to reconstruct the other half on their own.

Starting with transactions effected on or after Jan. 1, 2026, the framework expands materially. Brokers will have to report basis for covered securities (digital assets acquired through their platforms) alongside gross proceeds. That is a meaningful escalation in third-party oversight, and it creates both opportunity and risk for practitioners who are ahead of or behind this curve.

The Compliance Gap Nobody is Talking About 

Here is where CPAs and tax advisors need to pay close attention. Form 1099-DA does not capture the full scope of digital asset activity. Not even close. The IRS has explicitly carved out decentralized finance (DeFi) transactions, on-chain swaps, staking rewards, lending arrangements, automated market maker activity and other non-custodial interactions from mandatory 1099-DA reporting under Notice 2024-57. Foreign brokers and DeFi front-end service providers face separate timelines, with certain obligations pushed to 2027 and beyond.

Put simply: the form covers what brokers can see. Everything that happens outside of a custodial environment   which, for active crypto participants, can represent a significant portion of taxable activity   remains entirely in the hands of the taxpayer and practitioner to document and report. The IRS s cross-referencing capabilities are growing. Blockchain analytics tools are increasingly sophisticated. The gap between what 1099-DA captures and what investors actually owe is not a gap the IRS will ignore for long.

The Mismatch Problem is Real and Immediate 

One of the most pressing issues practitioners faced in the 2026 filing season, and will face even more in the 2027 filing season, is the reconciliation gap. A client who has used multiple exchanges, transferred assets between wallets, received tokens through staking rewards or participated in DeFi protocols is almost certain to have a 1099-DA that does not tell the complete story.

When reported proceeds on the 1099-DA do not match the figures on a client s return, the IRS notices. Mismatches invite inquiries, and inquiries can quickly escalate. The practitioner s job is to get ahead of this. That means reconciling 1099-DA data against full transaction histories across all wallets and platforms, verifying that noncovered assets   those acquired prior to 2026 or transferred in from external wallets   are properly documented and ensuring that off-form taxable events like staking income and DeFi gains are captured independently.

What Practitioners Must Do Right Now 

Practitioners need to be actively reviewing their clients' full digital asset transaction histories, not just the 1099-DA statements that arrive by mail or electronically. The IRS also proposed regulations in early 2026 to allow brokers to furnish 1099-DAs electronically by default, recognizing the inherent digital nature of these transactions. That makes it easier for clients to receive their forms and removes any excuse for not having the data in hand early in the filing cycle.

Basis tracking remains the highest-priority area of focus. For assets that are noncovered securities (those acquired before the mandatory basis-reporting window), clients and practitioners must rely on independent records, and those records need to be organized, defensible and reconciled to the 1099-DA. IRS Revenue Procedure 2024-28 provides a transitional mechanism for allocating unused basis to remaining holdings as of Jan. 1, 2025, and practitioners who have not yet helped clients take advantage of that transition should factor it into current-year planning.

The digital asset compliance landscape is not going to get simpler. If anything, 2026 is the beginning of a sustained escalation in reporting requirements, IRS enforcement capability and the scrutiny applied to taxpayers who hold and transact in these assets. The accounting profession has an important role to play in helping clients navigate this shift: not reactively, but proactively, with the kind of systematic approach that good tax practice has always demanded. 

This article appeared in the summer 2026 issue of New Jersey CPA magazine. Read the full issue.