What Crypto Investors Must Do Before 2026

Starting in 2025, crypto finally gets its own version of a 1099-B. For the first time, U.S. brokers must report your digital-asset sales and exchanges to both you and the IRS using a new form: Form 1099-DA. For anyone with meaningful token exposure founders, high-wealth investors, traders, family offices, and venture capital funds this shift represents the biggest reporting change the crypto world has seen.

Most investors won’t be ready when these forms arrive. Many won’t realize what is being reported, what isn’t, or what the IRS will see before they file their 2025 return. And because the first set of forms will likely not include your cost basis, the burden will fall on you to prove your gain or loss. The IRS will have your proceeds. It’s your responsibility to get the rest right.

This article explains what Form 1099-DA actually covers, what changes in 2025 and 2026, the mistakes we’re already seeing among sophisticated investors, and what you should be doing now to avoid mismatches, IRS letters, or a painful audit.

What Form 1099-DA Will Actually Show

Many people mistakenly think the new reporting rules mean crypto taxation becomes simple. Not quite. For the 2025 tax year (the forms you receive in early 2026), brokers are only required to report gross proceeds. That means exchanges will report to the IRS how much you received when you disposed of a digital asset, but they do not yet have to report your basis.

If you sell $3 million of tokens in 2025, the IRS will know you received $3 million. It will not know whether your gain was $2.8 million… or $20,000… or whether you lost money. That math is still up to you.

The full basis-reporting requirement begins in 2026, but only for covered assets, generally digital assets acquired after 2025 through custodial brokers. Assets purchased earlier or acquired through non-custodial means may never have a broker-reported basis. This creates a multi-year transition where your records matter more than ever.

Only custodial brokers, certain hosted-wallet providers, digital-asset payment processors, and crypto ATMs must issue 1099-DAs at this time. DeFi platforms, self-custody wallets, and many protocols do not fall under the 2025 rules. So you may receive some forms… but not all the forms you need.

Why Sophisticated Investors Are at the Highest Risk of Mismatches

High-net-worth investors often use multiple wallets and exchanges, engage in complex transactions, and handle large dollar amounts. That’s exactly the profile that gets mismatches flagged.

Consider the following scenarios:

• An investor moves ETH from Exchange A to Wallet B. The IRS recognizes proceeds from Exchange A when the ETH is later sold, unaware that the asset moved and its basis followed it.
• A founder receives tokens through vesting or SAFT agreements. Those events generally won’t appear on a 1099-DA, but they absolutely must be reported for tax purposes.
• A family office trades on both custodial exchanges (which issue forms) and DeFi platforms (which do not). The IRS sees only half of the investor’s activity, but the taxpayer is expected to report all of it accurately.

The New Number One Source of Confusion

Beginning in 2025, the IRS requires basis identification at the wallet or account level. Many investors have historically used a universal FIFO or treated all their wallets as one bucket. That approach will no longer work.

You must treat each wallet or account separately. If you sell from Wallet A, you must identify which lots inside Wallet A were sold. If you hold the same token across five wallets, each wallet needs its own basis tracking.

To help taxpayers align their records with what brokers will eventually report, the IRS issued a safe harbor that lets you allocate any “unused” basis to specific wallets as of January 1, 2025. But this allocation must be documented now, not after the first 1099-DA arrives.

The Pre-1099-DA Checklist

Here’s the short version of what you should be doing before the end of 2025:

1. First, create a full inventory of every exchange, hosted wallet, and self-custody wallet you used this year. If you invested across multiple platforms, compile year-to-date exports immediately. The later you wait, the harder it becomes.
2. Next, pick and document your basis method, usually either Specific Identification or FIFO, for each wallet. From now on, basis elections apply at the wallet or account level. You cannot mix and match across wallets.
3. Then, reconcile all transfers between wallets so they don’t appear as phantom sales. This is one of the biggest causes of IRS notices.
4. Also, track your fees carefully. Fees paid in crypto are a basis adjustment. If your exports don’t track them at the lot level, you’ll have to reconstruct them manually later.
5. Finally, identify all income events that won’t appear on a 1099-DA. Staking, rewards, airdrops, forks, and vesting are all taxable upon receipt. None of them is part of the broker-reporting regime yet. But the IRS will expect them on your return.

NFTs, Stablecoins, and Other Assets With Special Rules

The new regulations allow aggregate reporting for certain stablecoins and specified NFTs beginning in 2026. That means future forms may combine multiple transactions into one summary line. For investors who trade NFTs actively or hold multiple stablecoin lots, this can make it harder to track their gains.

In other words: the more complex your digital-asset portfolio, the more you need your own ledger, not just whatever the broker gives you.

What Happens If You Ignore All of This

Nothing catastrophic will happen immediately. You’ll still file your 2025 return without 1099-DA basis information. But in the background, the IRS will start comparing what it sees on your return to what brokers have reported.

If you reported $200,000 of gains and the IRS sees $2.5 million of proceeds reported from exchanges, you can expect a notice asking for clarification. Those notices are not accusations, but they require fast, accurate responses. If your records aren’t clean, your explanation won’t be either.

And once basis reporting joins the picture in 2026, discrepancies may become even more visible.

How Investors Are Preparing

This is the moment to tighten up your ledger before the IRS, not after, sees your data. Our Pre-1099-DA Records Review is built for HNW investors, founders, funds, and family offices managing complex token activity.

We help you:

• Consolidate and reconcile all 2025 transactions across exchanges and wallets.
• Build wallet-level basis files that align with IRS expectations going forward.
• Apply the safe harbor for unused basis allocations so you start 2026 clean.
• Document staking, rewards, venture token distributions, and other income that the 1099-DA won’t cover.
• Produce a gain/loss substantiation package that withstands IRS review.

If you want to avoid mismatches and position yourself for smooth filings in 2026 and beyond, now is the time to act.

Schedule a confidential Pre-1099-DA review, and we’ll help you prepare long before the first forms arrive. Reach out now!