The IRS has continued refining its digital asset tax guidance, with recent updates to its digital assets, Form 1099-DA, and digital asset FAQ pages. For taxpayers, the practical message is clear: digital asset reporting is moving into a more visible information-reporting environment, but the new forms will not eliminate the need for complete taxpayer records.
This is not a sudden change in how digital assets are taxed. The IRS continues to treat digital assets as property for federal income tax purposes, meaning sales, exchanges, payments, and certain other dispositions can create taxable gain, loss, or income. The shift is in reporting infrastructure. Brokers are now beginning to report certain digital asset transactions to taxpayers and the IRS using Form 1099-DA, Digital Asset Proceeds From Broker Transactions.
What the recent IRS updates clarify
The IRS states that broker reporting on Form 1099-DA applies to digital asset transactions beginning on or after January 1, 2025. For those transactions, brokers generally report gross proceeds. For certain transactions beginning on or after January 1, 2026, brokers must also report basis information.
That timing creates a planning gap. A taxpayer may receive a Form 1099-DA reporting proceeds from a digital asset sale, but the form may not include full basis information, especially for 2025 activity, older holdings, transferred assets, or noncovered assets. Taxpayers still need to calculate gain or loss and report transactions accurately, even when a form is incomplete or no form is received.
The IRS digital asset transaction FAQs also address common tax treatment issues, including how digital assets are treated as property, how gain or loss is calculated, and how digital asset transaction costs may affect amount realized or basis. For taxpayers with active trading, multiple wallets, stablecoins, NFTs, or digital asset payments, these details can change the reporting position.
Form 1099-DA is not a substitute for your own records
Form 1099-DA should help taxpayers identify reportable activity, but it should not be treated as a complete tax workpaper. A broker may know what happened on its platform, but it may not know the taxpayer’s full acquisition history, transferred-in basis, wallet activity, or tax intent. As such, taxpayers are responsible for maintaining records to substantiate basis, holding period, and gain or loss.
Taxpayers should preserve and reconcile:
- Exchange and broker reports
- Wallet-to-wallet transfer records
- Original acquisition dates and costs
- Transaction fees, gas fees, and commissions
- Stablecoin and NFT activity
- Staking, rewards, mining, or payment income
- Prior-year basis schedules and tax return positions
- Prior-year basis schedules and tax return positions
- Documentation supporting cost basis (purchase confirmations, trade receipts, and blockchain transaction IDs)
- Records identifying which digital asset units (tax lots) were sold or transferred, including documentation supporting specific identification, if used
- Fair market value of digital assets at the time of taxable events when not reported by a broker
- Records of gifts, inheritances, or assets received through nonpurchase transactions, including documentation used to determine basis
- Records of transfers between brokers or custodians to verify continuity of basis
- Documentation of any amended returns or IRS correspondence related to digital asset transactions
The 2026 Instructions for Form 1099-DA also make clear that not every digital asset item belongs on Form 1099-DA. For example, the instructions state that rewards and staking payments are not reported on Form 1099-DA. That does not mean the activity is automatically tax-free. It means taxpayers need to classify the item separately and determine the correct reporting treatment.
Basis identification relief gives taxpayers a 2026 planning window
The IRS also issued Notice 2026-20, extending temporary relief for adequate identification of certain broker-custodied digital asset units through December 31, 2026. This relief allows taxpayers to use their alternative methods such as tracking specific lots or using methods other than simple FIFO.
Without adequate identification, certain broker-custodied digital asset units may be treated as sold under FIFO rules. That can materially affect gain, loss, holding period, and estimated tax exposure. The relief gives eligible taxpayers more time to use books and records or standing instructions to identify which units were sold, disposed of, or transferred.
For active investors and high-net-worth taxpayers, this is a documentation opportunity. Before year-end, taxpayers should evaluate whether their exchange records, tax software, and advisory workpapers use the same lot methodology. Mismatches between broker reporting and taxpayer records should be addressed before filing, not after an IRS notice arrives.
Who should pay closer attention now
The new reporting environment is especially relevant for taxpayers who:
- Use multiple exchanges or wallets
- Transfer digital assets between platforms
- Hold assets acquired before 2026
- Trade stablecoins or NFTs
- Receive digital assets for services or business payments
- Have staking, mining, rewards, or airdrop activity
- Report digital assets through a business, trust, estate, or investment entity
Businesses that accept digital assets should also evaluate whether they have procedures for recording fair market value, reconciling payment processor reports, and identifying whether a disposition occurred when digital assets are used to pay expenses.
How Aura Advisors can help with digital asset tax reporting
Digital asset tax reporting is becoming more transparent to the IRS, but transparency does not always mean accuracy. Form 1099-DA may provide helpful reporting data, while still leaving taxpayers responsible for basis, classification, timing, and reconciliation.
Aura Advisors helps individuals, founders, investors, and businesses evaluate their digital asset activity against IRS guidance, reconcile broker and wallet records, identify documentation gaps, and build a defensible filing approach based on the taxpayer’s facts. General guidance can help frame the issue, but digital asset reporting should be reviewed in light of each taxpayer’s transaction history, records, entities, and risk tolerance.
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