Navigating cryptocurrency taxes in the U.S. requires understanding 1099 forms—the IRS's primary method for tracking non-employment income, including crypto transactions. This guide breaks down the essential forms, recent updates like the 1099-DA, and best practices for compliant reporting in 2025.
Key Takeaways
- 1099 forms report crypto income/transactions to the IRS (e.g., trading, staking, airdrops).
- Common forms: 1099-MISC (miscellaneous income), 1099-B (broker transactions), 1099-K (payment processing).
- 1099-DA launches in 2025 to standardize digital asset reporting but excludes DeFi activities like staking/lending.
- Gaps persist in cost-basis reporting, especially for transferred assets or decentralized transactions.
- Always consult a tax professional to avoid mismatches or audits.
Understanding 1099 Forms
A 1099 form documents income outside traditional employment (e.g., freelancing, investments, crypto activity). Unlike a W-2, taxes aren’t withheld—recipients must report the income themselves.
"There are over 20 types of 1099 forms, covering everything from rental income to cryptocurrency trades."
How They Work
- Issued by platforms (exchanges, payment processors) to the IRS and users.
- Recipients use the form to report income on their tax returns.
- Penalties apply for unreported income, even if no form is received.
Crypto-Specific 1099 Forms
1. 1099-B: Broker Transactions
Reports sales of crypto/assets, including:
- Gross proceeds (sale amount).
- Cost basis (purchase price)—often missing for transferred assets.
- Capital gains/losses.
👉 Example: Coinbase issues 1099-Bs for contract trading but may lack cost basis for external wallet transfers.
2. 1099-K: Payment Processing
Applies to crypto used for goods/services (e.g., NFT sales, business payments).
- Threshold: $20,000+ in transactions (originally proposed $600, now delayed).
- Pitfall: Only shows revenue, not profits—may trigger IRS queries.
3. 1099-MISC: Miscellaneous Income
Covers:
- Staking rewards.
- Airdrops.
- Referral bonuses.
- Taxable as ordinary income at fair market value.
The New 1099-DA (Digital Assets)
Launching in 2025, the 1099-DA standardizes reporting for digital asset brokers:
| What’s Reported | Exclusions |
|---------------------------|-----------------------------|
| Purchase/sale prices | DeFi (staking, lending) |
| Dates of transactions | Wrapping tokens |
| Gain/loss calculations | Liquidity mining |
⚠️ Limitation: Complex DeFi activities still lack clear reporting guidelines.
A Brief History of U.S. Crypto Taxes
- 2014: IRS classifies crypto as property (Notice 2014-21).
- 2019: Crypto question added to IRS Form 1040.
- 2021: Infrastructure Act expands "broker" definition to crypto platforms.
- 2025: 1099-DA takes effect.
FAQ
Do all crypto transactions require a 1099?
No—only those processed by brokers/payment platforms. Peer-to-peer or DeFi trades may not generate forms but still require reporting.
What if my 1099 lacks cost basis?
You’re responsible for tracking and reporting it. Use tools like transaction history exports or tax software.
Is the 1099-DA mandatory?
Yes, for brokers. Users receive it if their platform qualifies as a broker under IRS rules.
How do I report crypto taxes without a 1099?
Document all transactions (dates, amounts, purposes) and file using IRS guidelines for property sales.
👉 Pro Tip: Learn more about crypto tax strategies to optimize filings.
Final Advice
- Keep detailed records of all transactions.
- Consult a CPA for complex cases (e.g., DeFi, multi-platform activity).
- Stay updated—crypto tax rules evolve yearly.
Disclaimer: This content is educational. For personalized advice, consult a tax professional.