🪙 Digital Asset Tax Reporting

New IRS Crypto Reporting Rules: Form 1099-DA Arrives

After four years of work, the IRS has finalized its cryptocurrency regulations. Starting with the 2025 tax year, most crypto activity flowing through custodial platforms will be reported directly to the IRS—affecting investors in Fullerton and across Orange County.

Applies beginning with 2025 tax year

Digital asset brokers & investors

Written by Tandy Consulting Inc.

IRS Crypto Regulations & Form 1099-DA

New Reporting Era for Crypto Investors

After four years of work, the IRS has finalized its cryptocurrency regulations, and crypto tax reporting now begins. Starting with the 2025 tax year, custodial crypto platforms must report taxable crypto transactions directly to the IRS.

“Digital asset brokers” must handle this reporting when they take custody of the digital assets their customers sell or exchange. These brokers include

• operators of centralized trading platforms such as Coinbase, Kraken, and Binance; and

• hosted wallet providers (also called “custodial wallets”).

Most crypto transactions run through these brokers.

Brokers must file the new IRS Form 1099-DA, Digital Asset Proceeds From Broker Transactions. This form reports the following:

• Customer’s name, address, and taxpayer identification number

• Name and quantity of the digital asset sold

• Sale date

• Gross proceeds amount

Brokers must file the first Forms 1099-DA for the 2025 tax year by March 31, 2026.

For 2025 only, brokers must report gross proceeds from sales or other transfers. Gross proceeds represent the total amount you receive when you sell or exchange crypto, before any fees or other costs. Beginning in 2026, brokers must also report the customer’s cost basis—the original value of the crypto at acquisition plus any associated costs.

With Form 1099-DA in place, you will find it easier to calculate your crypto gains and losses when you file your return.

The regulations also establish rules for how crypto owners determine the basis of their crypto units. FIFO (first in, first out) serves as the default method. During periods of rising prices, FIFO typically produces the largest taxable gains because it uses your earliest—and often lowest-basis—units first.

If you want to reduce tax on crypto transfers, you can use the specific identification method instead. This method allows you to identify the exact units you transfer. Transitional rules for 2025 allow you to use specific identification in your own records without notifying your broker.

The final regulations also require crypto owners to track basis on a wallet-by-wallet basis when they hold crypto across multiple wallets or exchanges. You may no longer treat all your crypto as if it sits in a single wallet or account. If you had crypto in multiple wallets or exchanges on January 1, 2025, you must allocate your unused basis to the specific accounts where you hold each asset.

📄 Key facts about Form 1099-DA

• Applies to custodial platforms and hosted wallets acting as brokers.

• First forms due for the 2025 tax year by March 31, 2026.

• 2025: reports gross proceeds only.

• 2026 and beyond: adds cost basis reporting for many transactions.

🧮 Basis & method considerations

• FIFO is the default method for determining which units you sold.

• Specific identification can reduce taxable gains when used correctly.

• Transitional rules in 2025 let you track specific lots in your own records.

• Basis must now be tracked wallet-by-wallet across exchanges and wallets.

As crypto reporting tightens, keeping clean records and understanding how Form 1099-DA works will be crucial for investors and traders in Fullerton and throughout Orange County. Coordinated planning can help you manage gains, avoid surprises, and stay ahead of new IRS requirements.

📅 Schedule a crypto tax review

Who should pay attention?

Local investors & businesses

• Individuals trading on Coinbase, Kraken, Binance, and similar platforms.

• Business owners accepting crypto as payment.

• Frequent traders and DeFi users who also use custodial exchanges.

• Holders with multiple wallets or exchanges as of January 1, 2025.

Many Fullerton and Orange County investors already receive Forms 1099 from traditional brokers. Expect similar reporting for covered crypto activity going forward.

Action items for 2025

Get ready for Form 1099-DA

• Confirm which platforms you use qualify as digital asset brokers.

• Organize 2024 and earlier records before the new rules take effect.

• Decide whether you will use FIFO or specific identification where allowed.

• Map which assets sit in each wallet or exchange by January 1, 2025.

Work with Tandy

Crypto-aware tax support

Tandy Consulting Inc. helps crypto investors, traders, and small businesses in Fullerton and across Orange County interpret the new rules, coordinate reporting, and integrate digital asset activity into their broader tax plan.