This blog was last updated on November 19, 2025
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have finalized regulations under Internal Revenue Code § 6045, extending information-reporting obligations to transactions involving digital assets. Beginning with calendar-year 2025 activity (to be reported in 2026), brokers must file Form 1099-DA, Digital Asset Proceeds from Broker Transactions, and furnish corresponding payee statements to customers.
The intent is clear: to align digital-asset markets with traditional financial-asset reporting frameworks and close long-standing gaps that have hindered tax transparency.
What Is Form 1099-DA?
Form 1099-DA is the IRS’s newest information-reporting form designed to capture gross proceeds from sales or exchanges of digital assets. The form applies broadly to:
- Cryptocurrencies and stablecoins
- Non-fungible tokens (NFTs)
- Tokenized real-world assets and wrapped assets
- Certain synthetic or derivative digital contracts
For tax year 2025, filers are required to report gross proceeds only. Cost-basis and gain/loss reporting will become mandatory for 2026 transactions.
Who Is Considered a “Broker”?
Under the final regulations, the term broker encompasses a wide array of entities that effect digital-asset transactions for others, including:
- Digital-asset trading platforms and exchanges
- Hosted-wallet and custodial-service providers
- Certain payment processors and transaction facilitators
- Operators of decentralized protocols, if they exercise control sufficient to identify customers or determine transaction consideration
The definition is intentionally broad to prevent reporting gaps. Even foreign platforms may fall under § 6045 if they transact with U.S. customers or receive proceeds sourced to the United States.
Good Faith Relief ≠ Exemption from Filing
In Notice 2024-56, the IRS acknowledged the operational complexity of launching a new digital-asset reporting regime and offered limited transitional relief. However, the notice does not delay or suspend the 2025 filing obligation.
Instead, it provides that the IRS may waive penalties under §§ 6721 and 6722 only for brokers that make a demonstrable good-faith effort to comply.
What Constitutes a Good-Faith Effort?
To qualify, brokers must be able to document specific compliance actions, such as:
- Collecting valid Forms W-9 or W-8 from payees;
- Performing TIN-matching or other taxpayer-identification validation;
- Maintaining evidence of customer outreach and remediation for missing or invalid data; and
- Filing and furnishing statements timely or demonstrating progress toward operational readiness.
Good faith is performance-based, not intention-based. Merely asserting that “systems are not yet ready” does not satisfy the standard. Filing nothing is not considered compliance and removes the filer from potential relief.
The Consequences of Inaction
Information-Return Penalties
Failure to file or furnish correct information returns can result in compounded penalties:
- IRC § 6721 – Failure to file: up to $340 per return.
- IRC § 6722 – Failure to furnish: up to $340 per payee statement.
For a broker with 10,000 reportable accounts, penalties could exceed $6.8 million even before interest or intentional-disregard adjustments.
Backup-Withholding Liability
Under Treas. Reg. § 31.3406-(a)-1, brokers must withhold 24 percent of reportable proceeds when a payee fails to provide a valid TIN. Failure to withhold transfers liability for the uncollected tax, plus penalties and interest, to the broker.
Notice 2024-56 clarifies that “good-faith” relief for backup-withholding failures applies only when the broker actually attempted to obtain valid TINs and apply withholding correctly.
How to Prepare for 1099-DA Compliance
To align with the IRS’s expectations and establish a defensible compliance posture, brokers should implement the following actions now:
- Collect and validate taxpayer information. Gather Forms W-9/W-8 and perform TIN-matching through authorized services.
- Integrate data sources. Link trading-engine, custody, and customer-onboarding systems into a single reporting workflow.
- Implement withholding logic. Automate 24% backup withholding for missing or invalid TINs.
- Develop payee-statement processes. Plan delivery methods and customer-communication workflows for January 2026 deadlines.
- Perform end-to-end testing. Validate file formats against the IRS 1099-DA schema and conduct internal test submissions.
- Document compliance activities. Maintain logs of outreach, policy updates, and readiness milestones to demonstrate good faith.
- Engage qualified providers. Technology solutions such as Sovos support TIN validation, information reporting, and secure data exchange under the final regulations.
Frequently Asked Questions About 1099-DA
Do I have to file Form 1099-DA if my business is outside the U.S.?
Yes, if you transact with U.S. customers, the obligation may apply under IRC § 6045.
Does good-faith relief mean I can skip filing in 2025?
No. Notice 2024-56 provides penalty relief only for brokers demonstrating genuine compliance efforts—not for those who do nothing.
Do stablecoin transactions require reporting?
Yes, stablecoins are included in the legal definition of a digital asset in in IRC § 6045.
What happens if a customer refuses to provide a TIN?
As of January 1, 2027, brokers must apply 24% backup withholding and maintain documentation of outreach and attempted collection.
Is cost-basis reporting required in 2025?
No, only gross-proceeds reporting is mandatory for 2025 transactions. Cost-basis reporting begins with 2026 activity.
Will the IRS delay 1099-DA again?
There is no indication of any further delay. Notice 2024-56 explicitly states that filing obligations for 2025 remain in force.
2025 filing is not optional. Talk to a Sovos expert today about building a strong 1099-DA compliance workflow.