IRS Form 1099-DA, “Digital Asset Proceeds,” is being rolled out starting with the 2025 tax year. With this new form, the federal government is moving crypto reporting toward the familiar broker-based regime long used for stocks and bonds. However, for those who actively engage with decentralized finance (DeFi), Form 1099-DA may cause increased confusion, inaccurate reporting, and heightened audit risk stemming from the mismatch between how crypto transactions actually function and how they will be reported on the form.
In an article published in Tax Notes, we explore challenges arising from the new reporting framework, including the definition of “digital asset brokers,” the risk of phantom income caused by gross‑proceeds reporting, and the significant difficulties DeFi users may face in tracking cost basis. Mismatches between third‑party reporting and taxpayers’ economic reality could increase audit risk, even for sophisticated and compliance‑minded crypto users. The article provides practical considerations for crypto owners, including the importance of maintaining independent records, understanding transaction character, and working with tax professionals who understand DeFi protocol mechanics.
Read the full article in Tax Notes here.
