Form 1099-DA in 2026: Covered vs. Noncovered and What It Means for Your Crypto Tax

If you hold crypto in the US, the tax form sitting in your inbox this season looks similar to last year's but works very differently. For the 2026 tax year, Form 1099-DA requires brokers to report cost basis on certain digital asset sales, not just gross proceeds. The catch is that brokers only have to do this for a narrow category of transactions called "covered" assets. Everything else lands in a separate bucket called "noncovered," and those lots may show up on your form with completely blank cost-basis fields. Understanding how is crypto taxed in the US under this new split is no longer optional; it's the difference between a clean return and an IRS notice.

What Changed Between the 2025 and 2026 Form 1099-DA

When Form 1099-DA launched for the 2025 tax year, it did one thing: it told the IRS how much you received when you sold a digital asset. Gross proceeds only. Brokers like Coinbase, Kraken, and Crypto.com issued those forms for the first time, and the single-column approach was deliberately simple. The IRS described it as a transitional measure to give exchanges time to build the back-end infrastructure needed to track acquisition cost on a new asset class.

That transition period is now over. Starting with the 2026 reporting year, brokers must also report what you originally paid for an asset, your cost basis, but only where they can actually verify it. That verification requirement is exactly where the covered/noncovered distinction comes from.

The covered category

A digital asset is "covered" when the broker has seen both sides of the trade. Specifically, the asset must have been acquired on or after 1 January 2026 and must never have left the platform where it was acquired. If you bought ETH on Exchange A in February 2026, held it on Exchange A, and sold it on Exchange A, the broker watched the full lifecycle and can report both your proceeds and your basis with confidence. That sale is covered.

The noncovered category

A sale becomes "noncovered" the moment the broker's visibility breaks down. That happens in several common situations. An asset acquired before 1 January 2026 is automatically noncovered, regardless of where it was held. An asset that moved from one exchange to another is noncovered at the receiving exchange, because that platform never saw you buy it. The same applies to assets that passed through a personal hardware or software wallet, or that touched a decentralised protocol at any point. The broker at the point of sale simply does not have the data, and the rules don't require it to guess.

Why Blank Basis Fields Are a Real Problem

Here's where many filers get tripped up. When you receive a 1099-DA with blank fields in the cost-basis columns for your noncovered lots, that blank does not mean your cost basis is zero. It means the broker wasn't required to track it once the asset left its system. Your actual basis still exists. You paid something for that crypto, you still have trading records, wallet history, or exchange statements to prove it. The blank field is just the broker saying "we don't know."

How software can misread the gap

The real danger comes when tax preparation tools, or the people using them, treat a blank as a zero. If a noncovered lot has no basis reported and the software auto-populates zero, the entire sale price becomes a taxable gain. Say you bought a coin for $8,000, moved it to a second exchange for security reasons, and later sold it for $9,500. Your real gain is $1,500. But if the second exchange reports $9,500 in proceeds with no basis and your software reads that as a $9,500 gain, you've just overstated your taxable income by $8,000. Alternatively, some systems may skip the calculation entirely, which creates its own set of problems when the IRS cross-references what your broker reported against what you filed.

The underreporter notice risk

The IRS receives a copy of every 1099-DA your broker files. Its automated systems compare broker-reported proceeds against what appears on your return. A mismatch, whether caused by omitted noncovered sales or an incorrect zero-basis calculation, can generate an IRS CP2000 underreporter notice. Those notices arrive months after filing, often with proposed additional tax plus interest. Fixing them after the fact is far more time-consuming and stressful than getting the numbers right before you submit.

How Is Crypto Taxed in the US When Brokers Can't Report Basis

Nothing about the covered/noncovered split changes your underlying tax obligation. Under current IRS guidance, digital assets including stablecoins are treated as property. Every disposal, whether a sale for dollars, a trade for another coin, or a conversion of USDT or USDC into fiat, is a taxable event that requires you to calculate and report a gain or loss. The stablecoin rules deserve a specific mention here: even though Congress passed a federal stablecoin regulatory framework, that legislation deliberately left the IRS treatment untouched. A USDT to USD conversion is still a disposition of property. A USDC swap is still a disposition. If you're wondering about usdt tax or usdc tax obligations specifically, the answer under current law is the same as for any other digital asset: you owe tax on the difference between your cost basis and what you received.

The broker reporting framework doesn't shift that responsibility. It just determines how much of the calculation the broker does for you. For covered lots, the broker does most of the work. For noncovered lots, you do.

DeFi and Non-Custodial Wallets: Still Your Problem

There's an additional layer for anyone who trades on decentralised platforms. The rule that would have required DeFi front-end providers to act as brokers and issue 1099-DAs was repealed in April 2025. That means non-custodial wallets and decentralised exchanges currently sit outside the 1099-DA reporting regime entirely. No form will arrive for those trades. But the trades are still taxable. The IRS expects you to report gains and losses from DeFi activity on your return even without a form to guide you. If you've been active on any decentralised protocol, you'll need a complete export of your on-chain transaction history to calculate crypto taxes accurately. For a deeper look at what this means across DeFi, staking, and NFT activity, see our guide on what the 1099-DA means for DeFi, staking, and NFT holders.

Practical Steps to Take Before You File

Acting early is the only reliable way to avoid a scramble. Here's what to do before your return goes in.

Collect everything, not just your 1099-DA

Request full transaction exports from every exchange you've used, not just the one that issued your 1099-DA. Download wallet histories for any personal wallets that held assets during the year. The goal is a complete transaction log, from acquisition to disposal, for every asset. The 1099-DA only standardises the simplest part of the reporting process. The harder parts, matching historical purchases to current sales, reconstructing basis for moved assets, and accounting for DeFi activity, fall entirely on you.

Identify your noncovered lots early

Go through your 1099-DA and mark every lot where the basis field is blank or flagged as noncovered. Each of those requires manual reconstruction. If you remember buying the asset on a specific exchange, log into that platform and pull the original purchase record. Blockchain explorers can help verify transfer dates and confirm which wallet received an asset and when.

Consider filing an extension if data is incomplete

Last year, some exchanges reissued corrected 1099-DAs as late as the April 15 deadline, leaving almost no time to reconcile the new figures. If your records aren't complete well before the deadline, filing an extension gives you extra time to gather and verify data. Just remember that an extension to file is not an extension to pay: any tax owed is still due by the original deadline to avoid interest charges.

Think carefully about how you move stablecoins going forward

One practical strategy worth considering for future tax years: if you use stablecoins like USDC or USDT primarily as a transfer mechanism rather than as an investment, try to route those transfers directly to and from exchanges rather than letting them sit in intermediate wallets. If your more volatile crypto positions, BTC, ETH, altcoins, all live and trade within a single exchange account from the point of acquisition, that keeps their basis in the covered category and removes a significant layer of annual reconciliation work. It's not always possible given how people actually use crypto, but where it is possible, it simplifies how you calculate crypto taxes substantially year after year.

Accounting and Tax Implications at a Glance

The table below summarises the key reporting differences filers will encounter this season.

Situation	Covered or Noncovered	Who calculates basis	IRS mismatch risk
Bought and sold on the same exchange, acquired after 1 Jan 2026	Covered	Broker reports it	Low (if broker data is accurate)
Acquired before 1 Jan 2026, regardless of platform	Noncovered	You reconstruct from records	High if basis left blank
Transferred between exchanges or through a personal wallet	Noncovered	You reconstruct from records	High if basis left blank
Traded on a DeFi platform (no 1099-DA issued)	Not reported by broker	You reconstruct from on-chain data	High if omitted entirely
USDT or USDC conversion (usdt tax / usdc tax)	Depends on acquisition date and movement history	You or broker depending on coverage	Medium to high

For context on the broader legislative changes shaping crypto tax in the US this year, including proposed rules on stablecoins and staking rewards, see our breakdown of how the latest US stablecoin and staking tax bills could reshape reporting.

The Bigger Picture

Form 1099-DA is still a young instrument. The IRS is continuing to refine broker reporting requirements, and the timeline for further changes remains uncertain. The DeFi reporting rules remain in flux. The definition of "broker" is broad and evolving. That uncertainty is actually a reason to be more careful this year, not less. A return filed on clean, well-documented records is far easier to defend than one that relied on an automated import of incomplete form data.

The 1099-DA represents genuine progress in standardising the simplest layer of crypto tax reporting. But it doesn't automate accuracy. It shifts the floor up slightly while leaving the complexity exactly where it has always been: with you, the taxpayer. Firms and individual filers that treat the form as a starting point rather than a complete picture will be far better positioned when the IRS starts matching records at scale.

Source: Bloomberg Tax

Frequently Asked Questions

What does "covered" mean on my 2026 Form 1099-DA?

A covered asset is one your broker acquired on or after 1 January 2026 and tracked continuously within its own platform. For covered lots, the broker reports both your sale proceeds and your cost basis to the IRS. This is the straightforward case where the form does most of the work for you.

What does "noncovered" mean, and do I still owe tax on those sales?

Noncovered means the broker didn't have complete visibility into the asset's history, usually because it was acquired before 1 January 2026, moved between platforms, or passed through a personal wallet. You absolutely still owe tax on those sales. A blank cost-basis field doesn't reduce your liability; it just means you need to reconstruct your basis from your own records rather than reading it off the form.

Are stablecoins like USDT and USDC taxed differently in the US?

No. Under current IRS guidance, stablecoins are property, the same as Bitcoin or any other digital asset. Every time you convert USDT or USDC into fiat, trade it for another coin, or use it to pay for something, that's a disposal that may trigger a gain or loss. The recent stablecoin legislation established a regulatory framework for issuers but did not change the tax treatment. USDT tax and USDC tax obligations follow the same property rules as all other crypto.

Will my crypto tax software handle noncovered lots correctly if I just import my 1099-DA?

Not necessarily. Many tools auto-import 1099-DA data, but a blank cost-basis field for a noncovered lot can be read as zero basis, which would inflate your reported gain. Before relying on any automated import, check that your software distinguishes between a genuinely zero basis and a missing basis, and that it prompts you to supply the correct figure from your own records.

What happens if I don't report my noncovered lots accurately?

The IRS receives a copy of your 1099-DA and uses automated systems to compare broker-reported proceeds with what you file. If proceeds appear on the broker's copy but no corresponding gain or loss appears on your return, or if the numbers don't reconcile, an automated underreporter notice can follow. That notice will propose additional tax, plus interest from the original due date. Fixing a mismatch after the fact is significantly more time-consuming than getting it right before filing.