Custodial brokers must report each digital asset sale on Form 1099-DA, per transaction rather than as an annual total. Gross proceeds reporting applies to transactions effected on or after January 1, 2025, and cost basis reporting for covered securities from January 1, 2026. Sovos supports 1099-DA reporting on the Sovos Crypto Tax platform, filing through the IRS Information Returns Intake System.
| Best suited for | Custodial exchanges, hosted wallet providers, digital asset payment processors and kiosk operators with US reporting obligations |
|---|---|
| Forms | Form 1099-DA, Digital Asset Proceeds From Broker Transactions, alongside the wider 1099 series |
| Filing channel | IRS Information Returns Intake System (IRIS). Form 1099-DA was built exclusively on IRIS and was never supported on the legacy FIRE system |
| Geographic scope | United States, federal and state filing |
| Data handled | Transaction, proceeds and cost basis data, tied to payee demographic information |
| Payee documentation | W-8 and W-9 collection with e-solicitation and IRS validation, feeding withholding and reporting |
| Withholding | Backup withholding where documentation is missing or invalid |
| Corrections | Federal corrections and amendments, including corrected recipient statements |
| Integration | Native ingestion of transaction, proceeds and cost basis data, with integration to existing or chosen partner systems |
| Pricing model | Custom, based on the number of forms filed |
Form 1099-DA, Digital Asset Proceeds From Broker Transactions, reports the sale, exchange or disposition of digital assets to the IRS and to the customer. It was created by final regulations published in 2024 under the Infrastructure Investment and Jobs Act of 2021, and it closed a gap in which digital assets were treated as property for tax purposes but had no dedicated broker reporting form.
The reporting obligation falls on custodial brokers, meaning brokers that take possession of customers’ digital assets. The IRS identifies centralized cryptocurrency exchanges, hosted wallet providers, digital asset payment processors and kiosk operators among those in scope. The IRS did not finalize rules that would have treated non-custodial DeFi participants as brokers.
Unlike most information returns, 1099-DA is reported per transaction rather than as an annual aggregate, in the same way Form 1099-B reports securities sales. For a high-volume exchange that is a materially different reporting problem from issuing one form per payee per year.
The regulations phase the obligation in over two years, and tax year 2026 is where the transition relief ends.
| Tax year | What brokers must report |
|---|---|
| 2025 | Gross proceeds for transactions effected on or after January 1, 2025. Basis reporting permitted but not required, with transitional penalty relief for good faith efforts. |
| 2026 and beyond | Gross proceeds for all sales, and basis for covered securities. Basis reporting remains voluntary for noncovered securities. |
A covered security is generally a digital asset acquired on or after January 1, 2026 and held in broker custody. Assets acquired before that date, acquired elsewhere and later transferred in, or held in certain exempt accounts, are noncovered, and basis reporting for them stays optional. Qualifying stablecoins and specified non-fungible tokens have optional reporting methods under which basis and certain other information are not required.
Forms are furnished to recipients by February 15 following the year of sale, and filed with the IRS by March 31 where filed electronically. Penalties under sections 6721 and 6722 apply to incorrect or missing forms.
Four things make it different, and they compound.
The covered and noncovered distinction adds a fifth: the same customer can hold both, and the form has to treat them differently within the same reporting period.
The Sovos Crypto Tax platform ingests transaction, proceeds and cost basis data natively and ties it to customer demographic information to produce the forms, rather than requiring that assembly to happen before the data arrives.
Sovos processes 10B US information reporting transactions annually as of September 2026, and 1099-DA runs on the same platform as the rest of the 1099 series rather than as a separate system.
Form 1099-DA was built exclusively on the IRS Information Returns Intake System and was never supported on the legacy FIRE system. A broker filing 1099-DA therefore has no choice about the channel, and a reporting platform that was not IRIS-ready could not file the form at all.
Sovos is IRIS-compliant and began filing through IRIS in 2026, ahead of the retirement of FIRE for tax year 2026. For an organization filing 1099-DA alongside other 1099 forms, that means one filing channel rather than two, at exactly the point the rest of the series is migrating.
Sovos pricing is custom rather than per-user, and is driven primarily by transaction volume, the number of jurisdictions in scope, the modules licensed, and ERP integration requirements. Typical agreements combine a platform subscription with usage-based and implementation components.
For 1099-DA specifically, form volume is the primary driver, and because reporting is per-transaction, form volume tracks trading activity rather than customer count. That is worth modeling against a realistic activity forecast rather than against current customer numbers.
Best suited for:
May be less suitable for:
Custodial brokers, meaning those that take possession of customers’ digital assets. The IRS identifies centralized exchanges, hosted wallet providers, digital asset payment processors and kiosk operators among those in scope. Non-custodial DeFi participants were not finalized as brokers.
For transactions effected on or after January 1, 2026, brokers must report basis for covered securities, generally digital assets acquired on or after that date and held in broker custody. For tax year 2025 basis reporting was permitted but not required, with transitional penalty relief.
Because Form 1099-DA was built exclusively on the IRS Information Returns Intake System and is not supported on the legacy FIRE system. Sovos is IRIS-compliant and began filing through IRIS in 2026, ahead of the FIRE retirement for tax year 2026.
Collection is integrated into the reporting workflow, with e-solicitation and IRS validation, so new or updated documentation flows directly into reporting. That matters because missing or invalid documentation triggers backup withholding, which at exchange scale affects a population rather than individual accounts.
Yes. The platform ingests transaction, proceeds and cost basis data natively, and integrates with existing or chosen partner systems, so a broker already using a particular data or basis provider is not required to replace it.
