IRS 1099-DA Form Omits Cost Basis, Risks Overpayment
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- IRS Form 1099-DA debuts for the 2026 filing season, with exchanges including Coinbase and Robinhood required to send forms to users by Feb. 17 reporting their crypto sale proceeds.
- The form omits cost basis — if investors can't supply their original purchase price, the IRS system defaults to $0, potentially doubling their capital gains tax: a $50,000-to-$100,000 bitcoin trade could cost $15,000 in tax instead of $7,500.
- Coinbase VP Lawrence Zlatkin warned the IRS system is "designed to flag these data gaps and shift the burden of proof onto the taxpayer," calling the overpayment risk "a real, legitimate threat."
- Tracking cost basis is complicated by crypto's fragmentation across wallets and exchanges, closed platforms, forgotten keys, and scams — leaving "many with a broken trail," said OnChain Accounting co-founder David Zareh.
- The 1099-DA was created under the 2021 Bipartisan Infrastructure Law, and the Joint Committee on Taxation estimates it could generate approximately $28 billion in revenue over a decade.
- Bitcoin's plunge in early 2026 makes the timing especially painful for investors who sold at last year's record highs and now face potentially inflated tax bills on those gains.
- The form is triggered by trading crypto for other digital assets, selling for cash, using crypto to pay broker fees, or buying goods/services; wallet-to-wallet transfers and stablecoin sales under $10,000 don't count.
Why it matters: The 1099-DA fundamentally changes crypto tax reporting by relaying proceeds to the IRS without cost basis, with the agency defaulting to a $0 purchase price when taxpayers can't prove otherwise. Investors who moved assets across wallets face hiring professional reconcilers or a tax bill potentially double what they owe — worse timing as bitcoin has plunged from last year's highs.
