Form 1099-DA and Crypto Basis: What US Filers Must Know Now
If you hold crypto across multiple wallets or exchanges, the way the IRS expects you to calculate your gain has fundamentally changed, and a deadline that could protect your tax position is approaching fast. Wallet-by-wallet basis tracking became the permanent rule for US crypto tax from January 1, 2025. A transitional safe harbor under Revenue Procedure 2024-28 gave holders a one-time opportunity to allocate historical basis across their wallets before the new rules bit, but for many taxpayers that window is either already closed or will shut for good on October 15, 2026. Understanding how these rules interact with Form 1099-DA reporting, and where the gaps in that reporting leave you exposed, is now a practical necessity for anyone trying to file crypto taxes accurately in the US.
Why Wallet-by-Wallet Basis Tracking Changes Everything
Before 2025, many crypto holders, and some tax software products, used a pooled or "universal" approach: all units of the same coin were treated as sitting in one big pot regardless of which wallet or exchange actually held them. Final regulations under Internal Revenue Code Section 1012 ended that approach for acquisitions and dispositions on or after January 1, 2025.
The statutory foundation
The legal basis starts with IRC Section 1012(c)(1), which requires that cost-basis conventions be applied on an account-by-account basis for specified securities sold on or after the applicable date. The Infrastructure Investment and Jobs Act (IIJA) brought digital assets into the definition of "specified security" under Section 6045(g)(3)(B) and set January 1, 2023 as the applicable date. The final Treasury Regulations, specifically Treas. Reg. Section 1.1012-1(j), put that account-by-account mandate into operational effect for digital asset acquisitions and dispositions occurring on or after January 1, 2025.
What the rule actually requires
Under the new framework, you can't mix basis from one wallet with units held in another just because they're the same coin. If you hold bitcoin on an exchange and also on a hardware wallet, each is its own basis pool. When you sell, you have to identify which specific units you're disposing of, and the identification has to happen no later than the date and time of the sale.
For broker-held assets, Treas. Reg. Section 1.1012-1(j)(3)(ii) sets the bar: you must specify to the custodying broker the particular units being sold, by reference to an identifier the broker designates as sufficiently specific, such as purchase date, time, or price. If you don't do that, the default kicks in automatically.
The FIFO default and why it matters
When no adequate identification is made, the rules default to first-in, first-out (FIFO), applied within the relevant wallet or account. FIFO means your oldest, often lowest-cost, units are treated as sold first. For anyone who bought early and has seen significant price appreciation, that default can generate a materially larger taxable gain than a properly identified specific-lot sale would. Knowing how crypto is taxed in the US now means understanding that FIFO is not just a methodology choice: it's the consequence of failing to act.
The Rev. Proc. 2024-28 Safe Harbor: What It Was and What It Costs to Miss It
The IRS paired the wallet-by-wallet rules with a one-time transition mechanism under Revenue Procedure 2024-28. It allowed eligible taxpayers who held crypto positions and unused basis as of January 1, 2025 to make a reasonable allocation of that unused basis among the wallets and accounts containing the corresponding units. The idea was to give holders a structured way to migrate from a pooled approach to the new wallet-by-wallet system without having to perfectly reconstruct every historical transfer.
Two allocation methods and their deadlines
The safe harbor offers two paths. A specific unit allocation lets you assign particular lots of basis to particular wallets. For any given asset type, this window closes on the earlier of the date of your first sale, disposition, or transfer of that asset type after December 31, 2024, or the due date (including extensions) of your 2025 tax return.
A global allocation takes a broader approach across all holdings of an asset type. To be eligible, you must have described the global allocation method in your books and records before January 1, 2025. The completion deadline is the later of the two dates above.
For most calendar-year individual taxpayers who obtained a valid extension, both deadlines land on October 15, 2026. That date is now very close.
How one early sale can close the door permanently
Here's the scenario the Forvis Mazars analysis highlights, and it's worth understanding carefully. Suppose an investor held both Ether and bitcoin acquired between 2019 and 2024, spread across an exchange and a hardware wallet. In 2025, that investor sold some Ether without first completing a Rev. Proc. 2024-28 allocation and without having described a global allocation method in their records before January 1, 2025. No specific identification of the units sold was made either.
The result: because that was the investor's first disposal of Ether after 2024, the safe harbor is permanently gone for all of their Ether, across every wallet. FIFO applies to the 2025 sale. And for every future Ether sale from any of those wallets, the basis has to be reconstructed entirely from underlying acquisition records rather than from a safe harbor allocation.
One saving grace: the safe harbor applies separately to each type of digital asset. The Ether disposal doesn't close the window for the investor's bitcoin. If no bitcoin has been sold yet, the allocation can still be completed for bitcoin before the October 15, 2026 deadline.
This distinction matters enormously if you hold multiple assets. Audit your disposal history now, asset type by asset type, to know exactly where you still have safe harbor access and where you don't.
What Form 1099-DA Actually Reports, and Where the Gaps Are
Form 1099-DA is the new broker-issued information return that reports proceeds from digital asset sales. Brokers generally began reporting gross proceeds for sales and dispositions occurring on or after January 1, 2025. Mandatory basis reporting, however, only applies to "covered" digital assets, and the covered security definition has a specific start date that leaves large portions of most portfolios uncovered.
Covered vs. noncovered: the basis reporting gap
A digital asset qualifies as a covered security for Form 1099-DA purposes if it was acquired on or after January 1, 2026 in a customer's account by a broker providing custodial services, in exchange for qualifying consideration, and was held in that account until the broker effected the disposition. Assets acquired before 2026, assets for which the broker didn't provide custodial services at the time of acquisition, and assets transferred in from another platform or wallet, are all generally treated as noncovered. For noncovered assets, broker basis reporting remains voluntary.
The practical consequence for most active holders is significant. If you've been in crypto since 2021, 2022, or earlier, a large part of your portfolio is noncovered. Your 1099-DA may show proceeds but little or no usable basis. Relying on that form alone to calculate crypto taxes for your US return will produce an incomplete and potentially incorrect result. We've looked at what covered and noncovered securities mean for your crypto tax in an earlier piece, and the distinction continues to drive errors in self-prepared returns.
The transfer problem and why your records are the only solution
When you move digital assets from one platform to another or into self-custody, that transfer generally does not carry basis information to the receiving broker through a mandatory Section 6045A transfer statement. The receiving broker starts fresh. There's no automatic data handoff. Your own records, specifically the purchase date, purchase price, and the chain of transfers through which those units traveled, become the sole link between the original acquisition and the eventual disposition.
There's another subtlety worth noting: even where a broker does report basis on Form 1099-DA, you should verify that the reported figure reflects the actual units treated as sold under the wallet-by-wallet identification rules. And if you've supplied your own acquisition information to a broker for lot-selection purposes, be aware that under Treas. Reg. Section 1.6045-1(d)(2)(ii)(B)(4), a broker may use customer-provided acquisition data only for lot ordering, not as the basis for reporting your cost basis on the form itself.
For anyone wondering how to file crypto taxes correctly in 2026, the answer increasingly depends on the quality of records you maintained before any disposal, not the information your broker sends you afterwards. If you want to understand how Form 1099-DA affects DeFi, staking, and NFT holders, our earlier coverage addresses those asset-specific complications.
Building Records That Will Hold Up
The combination of wallet-by-wallet rules, the closing safe harbor window, and limited broker basis reporting puts the burden squarely on taxpayers to maintain their own records. The question isn't whether to do this: it's whether you've already started.
What a defensible record set looks like
For each wallet or account, you need the acquisition date and time, the number of units acquired, the price paid in US dollars at the time of acquisition, and the transaction ID or other unique identifier. Where assets were received as income, such as staking rewards or airdrops, you need the fair market value in USD on the date received, since that value establishes both the income amount and the cost basis of those units going forward.
Transfer records matter just as much. Any time you moved assets between wallets or platforms, those movements need to be documented so that a future disposals can be traced back through the chain. Without transfer records, a disposal from a hardware wallet looks like a sale of assets with zero basis, even if you paid full market price for them three years ago.
Acting before October 15, 2026
If you're a calendar-year individual filer with a valid extension and you still hold digital assets for which you haven't yet made a first post-2024 disposal, the safe harbor may still be available to you. You have until October 15, 2026 to complete a specific unit allocation or, if you described a global method in your books before January 1, 2025, to complete a global allocation.
If you're not sure whether you've triggered the safe harbor cutoff for any of your assets, the starting point is a full review of all 2025 transactions across every wallet and exchange. Any disposal in 2025, including transfers that the rules treat as dispositions, could have started the clock. Treat each digital asset type as a separate question: losing access to the safe harbor for one coin doesn't affect your position on others.
Frequently Asked Questions
What is the wallet-by-wallet basis rule and when did it start?
Under final IRS regulations implementing IRC Section 1012, US taxpayers must track the cost basis of digital assets on a wallet-by-wallet or account-by-account basis for acquisitions and dispositions occurring on or after January 1, 2025. You can no longer pool basis across all wallets holding the same coin. Each wallet or exchange account is its own basis pool, and gains or losses must be calculated within it.
What is Rev. Proc. 2024-28 and why does the deadline matter?
Revenue Procedure 2024-28 offered a one-time safe harbor letting taxpayers make a reasonable allocation of unused basis across wallets and accounts as of January 1, 2025, easing the transition from pooled to wallet-by-wallet tracking. The window closes on the earlier of your first post-2024 disposal of a given asset type or the due date of your 2025 return. For calendar-year filers with a valid extension, that's October 15, 2026. Once you've made a disposal without completing the allocation, the safe harbor is gone for that asset type permanently.
My 1099-DA shows proceeds but no basis. What should I do?
That's expected for many holders. Mandatory basis reporting on Form 1099-DA only covers digital assets acquired on or after January 1, 2026 in broker-custodied accounts. Assets acquired earlier, or transferred in from other platforms, are noncovered, and brokers aren't required to report basis for them. You need to reconstruct your own basis from original acquisition records, including purchase receipts, exchange transaction history, and transfer logs. If you can't locate those records, a tax professional with crypto experience can help assess your options.
If I gave my basis information to my broker, will they report it on my 1099-DA?
Not necessarily in the way you might expect. Under Treas. Reg. Section 1.6045-1(d)(2)(ii)(B)(4), a broker can use customer-supplied acquisition information for lot-ordering purposes but is not permitted to rely on it to report your cost basis on Form 1099-DA. The basis reported on the form must come from the broker's own records. You should always verify any reported basis figures against your own documentation before using them in your crypto tax report.
Does selling one type of crypto affect the safe harbor for my other coins?
No. The Rev. Proc. 2024-28 safe harbor applies separately to each type of digital asset. If you sold Ether in 2025 without completing an allocation, the safe harbor for Ether is gone, but your bitcoin allocation deadline is unaffected, provided you haven't yet made a post-2024 disposal of bitcoin. Review your disposal history on an asset-by-asset basis to understand exactly where you stand for each coin you hold.
Source: Forvis Mazars