Crypto 1099 forms report cryptocurrency income to the IRS to ensure investors comply with tax regulations. Understanding how these 1099 forms apply within the crypto landscape is essential for proper tax compliance.
Types of Crypto 1099 Forms
Each 1099 form serves a unique purpose based on the nature of your crypto activity. These forms are typically provided to taxpayers by January 31. This allows sufficient time to review the details for your crypto tax filing.
- 1099-B (Proceeds From Broker and Barter Exchange Transactions Form) reports capital gains and losses from crypto sales or exchanges. It includes information on cost basis, sale price, and transaction dates. Not all exchanges issue this IRS form.
- 1099-MISC (Miscellaneous Information Form) reports income such as staking rewards, bonuses, or airdrops over $600. It covers crypto income that doesn’t fall under the capital gains rules.
- 1099-K (Payment Card and Third-Party Network Transactions Form) reports the gross volume of transactions processed by payment networks. It’s issued by a crypto exchange when you have transactions exceeding $200 and above $20,000. Though less common today, some platforms still use it for payment processing.
- 1099-DA (Digital Asset Proceeds From the Broker Transactions Form) is new for 2025. It standardizes digital asset sales reporting by providing consistent details to improve tax compliance. Digital asset brokers must include their broker ID and account details, the type of transaction, purchase price, sale price, and dates of acquisition and sale.
Who Receives a Crypto 1099?
Exchanges issue crypto 1099 forms to U.S. taxpayers who meet reporting thresholds for trading, staking, mining, or airdrops. These forms are sent to both the taxpayer and the IRS to report crypto taxable events. Non-U.S. taxpayers may not receive a crypto tax form 1099 from U.S.-based exchanges but must still comply with their own country’s tax laws.
What to Do If You Do Not Receive a Form 1099
Even if you don’t receive a Form 1099 from your exchange, you must still report your crypto income on your annual tax filing. Don’t rely solely on exchanges to send these forms, as some may not issue them or may provide incomplete data. Keep your own detailed records and consider using crypto tax software or consulting an experienced cryptocurrency CPA to ensure every transaction is accurately documented.
How to Report Crypto Form 1099 Information on Your Taxes
Reporting crypto income correctly is crucial to ensure tax compliance. Each type of 1099 form requires a specific reporting process.
Reporting Income From Form 1099-MISC
Income reported on Form 1099-MISC, such as staking rewards, bonuses, interest, or mining, should be included on your tax return. The correct reporting method depends on the type of income earned.
Where to Report Your 1099-MISC Income
- Schedule 1 (Form 1040): Use this for staking rewards, airdrops, and other miscellaneous income from crypto. This crypto income is taxed as ordinary income.
- Schedule B (Form 1040): If you earned crypto interest (e.g., from lending platforms), report it here along with other interest income.
- Schedule C (Form 1040): Use this if the crypto income is part of a business or self-employment activity, such as mining or running a crypto-related service. Reporting on Schedule C allows for deductions on related business expenses.
Note: Even if you earned less than $600, you must still report crypto income to the IRS and pay the assessed federal tax.
Reporting Transactions From 1099-B or 1099-DA
Take these steps to report transactions from any Form 1099-B or 1099-DA that you receive:
- Use Form 8949 to List Each Transaction:
- Report each taxable event, including sales, trades, and exchanges.
- Provide details such as the date and time acquired, date sold, adjusted cost basis, and adjusted proceeds.
- If your 1099 form is incomplete or inaccurate (e.g., missing cost basis due to transfers between wallets), you must determine the error and ensure the correct information is used.
- Summarize on Schedule D:
- Transfer totals from Form 8949 to Schedule D, which calculates your total net capital gain or loss.
- Short-term gains (held for one year or less) are taxed as ordinary income, up to 37%.
- Long-term gains (held for more than one year) qualify for lower capital gains tax rates, between 0% and 20%.
If you’re unsure how to classify your crypto income, a crypto tax expert can help with accurate reporting.
How to Adjust Cost Basis and Proceeds
The adjusted cost basis is the amount you paid for the crypto plus any associated transaction fees. Likewise, the adjusted proceeds are the amount you received when disposing of your crypto minus any associated transaction fees. When you dispose of your crypto, subtract the adjusted cost basis from the adjusted sale price to determine your gain or loss.
Handling and Correcting Discrepancies
When discrepancies arise between your records and the amounts reported on your crypto 1099 forms, it’s essential to address them promptly to ensure accurate tax reporting. First, contact the exchange or issuer to request a corrected form, providing documentation if needed. Report the true and accurate amounts on your tax return, keep detailed records as proof, and be prepared to explain discrepancies if the IRS requests verification.
Two Common Mistakes
Avoid these two common mistakes when reporting your crypto transactions.
Misreporting Your Cryptocurrency Income or Capital Gains
One common mistake is assuming the IRS can’t track your crypto transactions, leading to the failure to report all your taxable crypto activities. The IRS requires you to report all crypto income, even if you don’t receive a 1099 form. Keeping detailed records and using crypto tax software is crucial to ensure accurate and complete reporting.
Double Taxation Risks
If your 1099-B or 1099-DA form is missing the cost basis—the original purchase price of your crypto—the IRS may calculate your taxable gain based only on the sale price. This can result in being taxed on the full proceeds rather than just your actual profits. To avoid overpaying, track your cost basis for every transaction and adjust your tax filings accordingly.
Dealing With Exchanges That Don’t Issue 1099s
If your exchange doesn’t provide a 1099, you are still responsible for reporting all of your crypto activities. Failing to report can result in penalties and interest charges.
Keep Detailed Records for IRS Compliance
Keeping thorough records of every crypto transaction is essential for IRS compliance. This includes not only the trades but also the dates, times, amounts, and any fees associated with them. You may need these records to back up your tax return in case of an audit.
Using Crypto Tax Software to Track Trades and Income
To ensure accurate reporting, using crypto tax software is highly recommended. These tools help track every transaction, calculate capital gains and losses, and generate tax reports. This makes compliance easier, especially if you use multiple exchanges.
For optimal accuracy, consider an accounting software implementation service to configure your tax software correctly and ensure it captures all relevant transaction data.
IRS Regulations and Compliance Updates
The IRS is continuously enhancing its cryptocurrency tax reporting requirements. Staying up-to-date with these changes is crucial for crypto investors.
New IRS Enforcement Efforts
The IRS has significantly increased its enforcement efforts related to cryptocurrency. It is now more actively auditing cryptocurrency transactions and ensuring investors report their income correctly. This includes reviewing crypto 1099 forms and using data from exchanges to identify discrepancies.
The New IRS Form 1099-DA
Form 1099-DA is now in place for the 2025 tax year and is reshaping crypto tax reporting. This form applies to covered securities, which the IRS defines as any digital asset acquired after 2025 through cash, stored-value cards, other digital assets, or taxable property or services in a broker-managed account.
Key Highlights of Form 1099-DA
- Mandatory Reporting for Brokers: Brokers, including major exchanges and certain digital asset payment processors, must report gross proceeds and essential transaction details.
- Cost Basis Reporting: In 2025, brokers have the option to report cost basis, but it is not required. Mandatory cost basis reporting will begin in 2026.
- Accounting Method Flexibility: Investors can continue using accounting methods such as FIFO, LIFO, or HIFO for cost-basis calculations in 2025. However, mandatory use of FIFO for crypto transactions will begin in 2026.
- Exemptions for Decentralized Platforms: Decentralized exchanges (DeFi) and unhosted wallets are exempt from third-party reporting until 2027.
How to Prepare for the 1099-DA
- Maintain detailed records of all digital asset transactions, including purchase dates, sale dates, cost basis, and fair market values.
- Use specialized crypto tax software to track transactions and calculate gains or losses.
- Consult a crypto tax professional to ensure your reporting aligns with the new IRS requirements.
Potential Penalties for Non-Compliance
Failure to comply with crypto tax reporting regulations can result in penalties and fines. These penalties can be substantial, depending on the severity of the non-compliance. To avoid these consequences, it is important to report all crypto transactions accurately and promptly.
The Path to Crypto Tax Compliance
Understanding the different types of crypto 1099 forms and how to report them accurately is essential for staying compliant with IRS tax regulations. Whether you are dealing with staking rewards, capital gains, or transactions from multiple exchanges, proper reporting ensures you avoid penalties and potential legal consequences. You can simplify the process and avoid common reporting mistakes by maintaining thorough records and using reliable tax software.
Staying informed about the latest changes in crypto reporting is critical as the IRS continues to enhance its enforcement efforts and update regulations. New forms like the 1099-DA are reshaping crypto tax reporting, but accurate tracking and timely reporting will always be essential. By adhering to these guidelines and consulting with an experienced crypto CPA, you can confidently navigate the evolving landscape of crypto taxation.
