Crypto Tax Reporting in 2026: Form 1099-DA, Wallet-by-Wallet Basis, and What Exchanges Now Send the IRS

If you sold crypto in 2025, a Form 1099-DA probably showed up in your inbox in late January. It listed a large proceeds number and almost nothing else. No purchase price, no gain, no loss. That was not a glitch. It was year one of a two-stage rollout, and the easy stage is over. Crypto tax reporting for 2026 transactions adds cost basis, and that is where the mismatches start.

Year One Reported the Sale Price and Stopped There

Form 1099-DA, “Digital Asset Proceeds From Broker Transactions,” replaced a decade of improvisation in which some exchanges sent a 1099-MISC, some sent a 1099-K with an alarming gross volume figure, and plenty sent nothing at all. Under the final regulations, brokers had to report gross proceeds for transactions effected on or after January 1, 2025, and basis for certain transactions effected on or after January 1, 2026. Coinbase, Kraken, and Crypto.com all issued the forms for the first time this past filing season, reporting what your crypto sold for and not what you paid for it.

That gap is the whole story. The IRS now has a proceeds figure it can machine-match against your Form 8949. If your return does not account for every sale on that form, the notice writes itself.

2026 Splits Your Holdings Into Covered and Noncovered

For 2026 transactions, reported in early 2027, brokers must report basis. But only on a narrow slice of your portfolio. A “covered security” here means a digital asset acquired on or after January 1, 2026 and held continuously in the same broker’s account until sale. Anything acquired before that date, or transferred in from an outside wallet or another broker, is noncovered, and the broker is not required to report basis on it.

Look at the bottom four rows. For most long-term holders, the IRS gets a proceeds number with a blank next to it.

Run the math on a common setup. One bitcoin bought in 2021 for roughly $38,000, moved to a different exchange for custody reasons, sold there in 2026 for $95,000. The real gain is $57,000. The form shows $95,000 with the noncovered box checked and basis blank. If you cannot substantiate what you paid, the IRS position is a $95,000 gain. The spread between the two is $38,000 of phantom income, which at a 20 percent capital gains rate plus the 3.8 percent net investment income tax runs about $9,000 in tax you do not actually owe.

Every Wallet Is Now Its Own Ledger

The second change gets less attention and causes more damage. Since January 1, 2025, basis must be tracked wallet by wallet and account by account under the 2024 final regulations at Section 1.1012-1(j). The universal method, where you pooled every lot across every wallet and let software pick the most favorable one, is gone.

Rev. Proc. 2024-28 offered transition relief: a one-time reasonable allocation of unused basis to the wallets holding the remaining units. That allocation was irrevocable, applied only to capital assets, and had to be completed on a deadline tied to the start of 2025. If you did not take it, you are locked into whatever basis sat in each wallet at the start of 2025, and basis only moves between wallets through actual transfers.

Practical translation: a HIFO strategy that produced a great result in 2024 may produce a very different one now, because the high-basis lot living in your hardware wallet is no longer available to offset a sale on an exchange.

The Specific Identification Clock Runs Out on December 31

Here is the deadline almost nobody has on their calendar. To pick which lot you are selling, the regulations require you to tell the broker, at or before the moment of sale, which units are going. Miss that and FIFO applies by default, which usually means your oldest and cheapest lot gets sold first.

Brokers were not technically ready for this, so the IRS granted relief allowing your own books and records to serve as the identification. On March 18, 2026, the IRS released Notice 2026-20, extending that relief for transactions from January 1, 2026 through December 31, 2026. Taxpayers may not rely on it for sales made after the relief period ends.

The notice also warns, in plain terms, that for 2026 transactions the acquisition date and basis a broker reports may not match the lot identification and basis on the taxpayer’s own books. Two documents, two answers, one reconciliation you have to be able to defend.

Starting January 1, 2027, the books-and-records workaround disappears. You will need a standing order or a transaction-level instruction on file with the exchange itself.

What Exchanges Still Do Not Send

The reporting net has real holes, and they are not permission to skip the income. The DeFi broker regulations were overturned in April 2025, so front-end DeFi participants are not brokers under Section 6045 and have no reporting obligation. Self-custody activity, peer-to-peer transfers, on-chain swaps, and most staking mechanics outside a custodial platform generate no form at all.

And no, small purchases are not exempt. Proposals for a de minimis threshold have been floating around Congress for two years, but none has become law. Buying a coffee with bitcoin is still a taxable disposition.

Three Things Worth Doing Before January

Export full transaction history from every exchange and wallet now, while the accounts are open and the data is retrievable. Log into each custodial account and check whether it supports standing lot-selection orders, then set one before the 2027 calendar flips. And reconcile your own basis records against the 2025 forms you already received, because if they disagree, this is the quiet season to fix it rather than the one where a CP2000 notice sets the schedule.

Crypto tax reporting stopped being self-reported and became a matching problem. The taxpayers who come out clean are the ones whose records can answer the form line by line. If you are holding digital assets across multiple wallets and want that reconciliation handled before year end, OliRam Advisors works with clients throughout Miami and South Florida on exactly this.