Form 1099-DA First Season: What to Do When Your Crypto Broker's Numbers Disagree With Your Return

If you sold any digital asset in 2025 and your custodian was a centralized exchange or U.S. broker, you should have received a Form 1099-DA in January or February 2026. For most filers, this was the first time the IRS received third-party reporting on a crypto transaction. The numbers on those forms are now landing in the IRS information-matching system. If what you reported on Form 8949 does not line up with what the broker reported, the agency will eventually notice.

I am writing this for the filer who already filed their 2025 return, did the basis math themselves with their own records, and is now staring at a 1099-DA that says something different. The instinct is either to amend immediately or to ignore the form entirely. Both are wrong. The right answer is in between, and it depends on whose number is actually correct.

What 1099-DA Actually Reports for 2025

Under the final regulations issued in June 2024, U.S. digital asset brokers were required to start reporting customer transactions on Form 1099-DA beginning with the 2025 tax year. For 2025, brokers had to report gross proceeds from digital asset sales. They were not yet required to report cost basis, holding period, or character of gain or loss. Mandatory basis reporting begins with the 2026 tax year (forms received in 2027).

Many brokers chose to report basis voluntarily for 2025, especially for assets purchased on their platform after January 1, 2025. The trouble is that almost no broker has accurate basis for assets you held before January 1, 2025, or for assets you transferred in from another wallet or another exchange. Their reported basis on those positions is either zero, blank, or a guess based on incomplete data.

Why Basis Is Wrong on Most 1099-DAs

Pre-2025 holdings are the biggest source of error. If you bought Bitcoin on Coinbase in 2021 and sold it in 2025, the broker may show your basis as zero because they were not required to track it under the rules in effect at the time of purchase. The proceeds are right. The basis is missing.

Transferred-in coins are the second source. If you moved a position from Kraken to Coinbase in 2023, the receiving broker has no idea what your basis is. They report your proceeds correctly when you sell, but they cannot report basis because they never had the data.

Self-custody activity sits outside broker reporting entirely. Coins you hold in a hardware wallet, in a self-custodied software wallet, or on a decentralized exchange are not reported on a 1099-DA. They never were. They never will be. You are still responsible for reporting those transactions on your own Form 8949.

Staking rewards, hard forks, and airdrops are often miscoded. A reward credited as a property receipt should produce ordinary income equal to the fair market value at receipt and a basis equal to that value going forward. Several brokers initially reported these events as zero-basis acquisitions, which produces wildly inflated capital gain on later sale.

The Transition Relief You Should Have Used

Revenue Procedure 2024-28 (issued June 2024) gave taxpayers a one-time election to allocate unused basis to specific units of digital assets, on a wallet-by-wallet basis, effective January 1, 2025. The procedure ended the universal cost-basis method that many filers had been using and required wallet-specific tracking going forward. The accompanying IRS Notice 2024-57 set safe harbors for what counts as a reasonable basis allocation across wallets.

Taxpayers who used the safe harbors are in a defensible position even if the broker's number is different. Taxpayers who never made the allocation are in a harder position because the IRS now expects to see wallet-specific tracking on every Form 8949 line item. If you filed your 2025 return without doing the allocation, your reported basis may not survive scrutiny even if it was right under the pre-2025 method.

When Your Number and the Broker's Number Disagree

Start with a basic question: which number is right?

If your records are accurate (purchase confirmations, exchange CSV exports, block-explorer transaction history) and your basis math is correct, you stand on your number. The IRS uses 1099-DA for matching, not for assessment. A mismatch alone does not mean the broker wins. You report your own basis on Form 8949 and use the appropriate code in column (f) to flag the adjustment.

Specifically, code B is the standard adjustment code when the basis reported on a 1099-B or 1099-DA differs from the correct basis. You enter the broker's reported basis in column (e), then enter the adjustment in column (g) to bring the result to your correct gain or loss. Form 8949 instructions explain the mechanics. Done correctly, the form leaves a clear paper trail showing both numbers and your reason for the adjustment.

If your records are not accurate and you used a placeholder, an estimate, or a number you no longer remember the source of, the broker's number is probably also wrong, but you cannot prove your number is right. That puts you in negotiation territory and you should call a tax professional before responding to any IRS notice.

When You Actually Need to Amend

You should file Form 1040-X if you used the wrong basis and underreported gain (or overreported loss), if you failed to report a transaction at all, or if you used the universal cost-basis method for 2025 instead of the new wallet-by-wallet method.

Voluntary amendment before the IRS contacts you is almost always cheaper than waiting for a notice. The IRS treats voluntary amendments as a sign of good faith, which usually limits exposure to interest plus a possibly waivable accuracy-related penalty under Section 6662. Once a CP2000 notice arrives, the negotiation gets harder.

You do not need to amend just because the broker's number is different from yours. If your number is correct and supported by records, the matching mismatch is a notice problem you can resolve with a simple response, not a return correction.

The CP2000 Notices That Are Coming

The IRS pulls 1099-DA data into its Automated Underreporter program. When the broker-reported proceeds (or basis, in 2026 onward) do not match what you reported, the system generates a CP2000 proposed assessment. These notices typically arrive 12 to 24 months after the return is filed, so the first wave for 2025 returns will likely hit in 2027.

A CP2000 is not a final assessment. It is the IRS proposing additional tax based on the matched data. You have 30 days to respond. If your records support your reported numbers, you respond with a clear explanation, copies of the supporting documents, and a corrected calculation. The notice goes away. If you ignore it, the proposed assessment becomes final, and getting it reversed after that is meaningfully harder.

Documentation You Need to Have Ready

Pull together the original purchase confirmations for every position you sold in 2025. These are the documents that establish basis. If you bought through an exchange, the order confirmation email is usually the cleanest record. If you bought through a wallet using fiat, look for the bank or card transaction record alongside the wallet receipt.

Pull the full transaction history from every exchange or broker account that touched the position. Most major exchanges allow you to export a CSV of every trade and every transfer. Save those exports.

For self-custody activity, pull the block-explorer history for the relevant wallet addresses. Etherscan, Blockchain.com, and similar tools give you a complete record of every transaction. Annotate each transaction with the corresponding fiat value at the time using a price source like CoinGecko or CoinMarketCap.

Save the workpapers you used to compute basis. If you used a tax tool like CoinTracker, ZenLedger, or Koinly, export the underlying detail report, not just the summary. The IRS sometimes asks for the line-by-line math.

Practical Steps This Week

Pull every 1099-DA you received for 2025. Lay them next to your filed Form 8949. Compare proceeds line by line and basis line by line. For each mismatch, decide whose number is correct and document why.

If you find a real reporting error in your favor or against, prepare Form 1040-X. Do not wait for an IRS notice.

If the mismatch is the broker's error and your number is right, prepare a one-page memo explaining the discrepancy and attach it to your records. If a CP2000 arrives later, you already have the response written.

Keep all of this for at least six years. The statute of limitations on underreporting more than 25 percent of gross income is six years, not three.

When to Bring in an Attorney

If the dollar amount in dispute is over $25,000, the savings from getting it right justify the help. If you have transactions across multiple exchanges, multiple wallets, and DeFi positions, the math is often intractable for a non-specialist. If you have already received an IRS notice (CP2000, Letter 6173, Letter 6174-A), the timeline is short and the wrong response can cost you.

I work with crypto filers regularly. Initial consultation is a free 30-minute call where I review your 1099-DA stack and your filed return and tell you whether amending, responding, or doing nothing is the right play.

First-cycle reporting was always going to be messy. The IRS knew it. The brokers knew it. The transition relief in Rev. Proc. 2024-28 was an attempt to make the rough edges manageable. What it did not do was eliminate them. If you sold any digital asset in 2025 and have not done a careful comparison of your reported basis against your broker's reported basis, you are looking at a potential CP2000 some time in 2027 with documentation that may have grown harder to assemble by then. The cleanest move is to do the comparison now while the records are still fresh.