Picture frantically searching through old emails at 11 PM on April 14th, 2026, trying to prove you didn’t make a $50,000 profit on that Bitcoin sale. Welcome to the 1099-DA era, where missing cost basis documentation could turn your $7,500 tax bill into $15,000 overnight. This new IRS form reports what you sold crypto for but not what you paid—leaving you to prove your purchase price or watch the government assume you got it for free.
The Reporting Gap That Costs Real Money
Form 1099-DA launches with critical information missing for two years.
Starting with 2025 transactions filed in 2026, brokers like Coinbase, Robinhood, and Kraken must issue Form 1099-DA showing your gross proceeds from crypto sales. The catch? They won’t report cost basis until 2027, creating a two-year window where you’re flying solo.
“This is a real, legitimate threat… customers [don’t like to] overpay,” warns Lawrence Zlatkin, Coinbase’s VP of Tax. The form captures:
- Sales
- Exchanges between cryptocurrencies
- Crypto payments for goods
Basically any time digital assets leave your account. Purchasing, holding, or transferring between your own wallets stays off the radar.
When Missing Records Cost Thousands
IRS defaults to zero cost basis, turning paper gains into real tax bills.
The math hits hard when you can’t prove purchase prices. Buy Bitcoin at $50,000, sell at $100,000 after holding more than a year, and you owe $7,500 in long-term capital gains taxes (15% rate). But without cost basis documentation, the IRS treats that entire $100,000 as profit—doubling your tax bill to $15,000.
Your exchange’s 1099-DA will dutifully report the $100,000 sale. The IRS computer systems will flag the missing cost basis and default to $0.
You’ll get a bill that assumes you materialized that Bitcoin from thin air.
The Fragmented Trail Problem
Multiple platforms and closed exchanges create documentation nightmares.
Modern crypto portfolios resemble digital archaeological sites. You bought some Bitcoin on Coinbase in 2019, traded for Ethereum on Binance, moved funds through three different wallets, and maybe lost access to that exchange that went bust last year.
“Fragmentation of transactions leaves many with a broken trail,” explains David Zareh from OnChain Accounting. Your current exchange can provide internal transaction history, but external transfers create gaps that turn tax season into detective work.
Those closed platforms and forgotten wallet addresses don’t care about your April deadline. Start consolidating transaction records now—waiting until 2026 means playing catch-up with incomplete data.
