IRS Introduces Form 1099-DA for Digital Asset Reporting

The IRS has announced the introduction of Form 1099-DA, which will be used by digital asset brokers to report sales starting in 2025. According to NS3.AI, this form requires brokers to disclose gross proceeds from digital asset transactions but does not mandate the reporting of the cost basis. This omission has led to confusion among investors, who now face the challenge of reconstructing their purchase cost information, particularly when assets are transferred between different wallets and exchanges. The new reporting system raises concerns about potential tax overpayments or receiving IRS notices due to discrepancies in reported figures. As a result, there is a growing trend among investors to maintain their cryptocurrency holdings within single custodial accounts to simplify tracking and reporting.