As part of the Infrastructure and Jobs Act (IIJA) passed during the Biden Administration, final rules were developed for reporting on transactions of digital assets conducted by decentralized financial brokers (DeFi). Decentralized finance is a growing industry area where transactions, simple and complex, are conducted without a centralized authority, like a bank.
Given the regulatory perspective on the digital asset space, the new reporting requirements aim to provide greater transparency to the IRS on personal assets, and a broader view of potential avenues for tax fraud, money laundering, and tax evasion.
Interest in digital assets continues to grow. Despite continuing crypto volatility and an upswing in scams and theft impacting the industry, the fluidity and ease of crypto exchanges is not going away.
The IRS considers digital assets to be taxable property—this means crypto, stablecoin, and non-fungible tokens (NFTs). Another term for a digital asset that is valued in physical currency is a convertible virtual currency. Like cash, you might exchange digital assets, use them for purchases, or convert them.
Taxpayers need to answer a digital asset question each year on their federal return regarding their receipt and handling of digital assets. For 2026, when brokers working in Defi conduct a transaction involving sales of digital assets, they will need to report the gross proceeds on that sale. The field of brokers who will need to file this form is broad. It includes platforms and people who manage digital assets for others, or those who handle digital asset trading, and more.
The form is 1099-DA, Digital Asset Proceeds from Broker Transactions. This is the first year this form will be used to capture data from 2025. Brokers handling these transactions, and completing this form are required to provide the form to the IRS and to their taxpaying client. The IRS recommends tax professionals take caution to ensure they receive appropriate detail for digital asset transactions across platforms to be able to account for them accurately.
The new rules are extensive. To remain compliant, be sure your accountant or tax professional is aware of your digital holdings and has the information needed to accurately calculate your holdings—physical or digital.
With the introduction of Form 1099-DA, the IRS is gaining clearer insight into cryptocurrency transactions, broker activity, and digital asset proceeds. For taxpayers and businesses operating in this space, errors, omissions, or inconsistencies can quickly raise red flags—sometimes with serious consequences.
If you have concerns about how digital assets are reported on your return, or whether past crypto activity could expose you to IRS scrutiny, experienced legal guidance is critical. Robert J. Fedor, Esq., L.L.C. advises individuals and businesses on navigating complex tax compliance issues and responding to potential enforcement actions. We represent clients internationally and throughout Northeast Ohio, Chicago, and New York City from our offices in Cleveland and Chicago. Contact our legal team today at 440-250-9709.
To better understand where compliance ends and criminal exposure can begin, download our free eBook, Will I Be Charged with Criminal Tax Fraud?. This guide explains what the IRS looks for, the “badges of fraud” used in criminal cases, and how taxpayers can protect themselves before mistakes escalate. Download now and gain clarity before the IRS takes a closer look.