Your Coinbase 1099-DA arrived. It says you had $340,000 in proceeds. Your portfolio is worth $18,000. Both numbers are technically accurate. That’s the magic of gross proceeds reporting, and it’s going to confuse a lot of people this filing season.
The 1099-DA is new. Exchanges are figuring it out as they go. The IRS is watching. You should probably understand what you’re looking at before your return goes out the door.
What Is a 1099-DA?
Form 1099-DA is the IRS’s new digital asset broker reporting form. Brokers — which now includes centralized exchanges like Coinbase, Kraken, and Gemini — are required to report your digital asset disposals to the IRS the same way a stock broker reports your equity sales on a 1099-B.
The form went live for the 2025 tax year. Exchanges started issuing them in early 2026 for activity that occurred in calendar year 2025. If you traded on a centralized exchange in 2025, you likely received one.
The IRS also gets a copy. That’s the part that matters.
What Each Box Actually Means
The 1099-DA reports disposal activity. The key fields:
- Box 1a — Description of property: The asset sold (BTC, ETH, USDC, etc.)
- Box 1b — Date acquired: When you originally got the asset. Often blank or wrong on transferred-in positions.
- Box 1c — Date sold or disposed: When the disposal occurred.
- Box 1d — Proceeds: Gross proceeds from the disposal. This is the full sale amount — not profit, not net.
- Box 1e — Cost or other basis: What you paid for it. This is where things fall apart.
- Box 1g — Adjustments: Wash sale disallowances and other modifications. Mostly relevant for stocks; crypto wash sale rules don’t formally apply the same way yet, but the field exists.
- Box 6 — Reported to IRS checkbox: Whether basis was reported to the IRS. If box 6 says “B” (basis not reported), the IRS only sees proceeds — not cost. You still have to reconcile.
The relationship that matters for your taxes is: proceeds minus cost basis equals gain or loss. If cost basis is missing or wrong, the IRS defaults to zero — meaning every dollar of proceeds looks like a gain.
The Most Common 1099-DA Errors You’ll See
Missing Cost Basis on Transferred-In Assets
This is the big one. If you bought ETH on Coinbase in 2021, moved it to a hardware wallet, and then sent it back to Coinbase in 2024 to sell in 2025 — Coinbase doesn’t know what you paid for it in 2021. The transfer back in looks like a deposit from nowhere.
Result: Box 1e shows $0.00 or is blank. Box 6 says basis not reported. The IRS sees $40,000 in proceeds and $0 in cost. Your actual gain might be $2,000 or even a loss.
This isn’t Coinbase being lazy. They genuinely don’t have the data. But the consequence falls on you.
Inflated Gross Proceeds
Some exchanges are reporting gross proceeds before fees, or including stablecoin swaps at full notional value in ways that look much larger than your actual economic activity. If you swapped USDC to USDT repeatedly as part of normal treasury management, each swap may appear as a separate sale with full gross proceeds reported.
Your $50,000 in activity can produce a 1099-DA that looks like $800,000 in proceeds if you were active. The IRS sees $800,000. You need a return that explains where that number goes.
Wallet-to-Wallet Transfers Reported as Disposals
This is the one that causes the most confusion. Some exchanges are treating transfers out of the platform as disposals — because from their data perspective, the asset left. They can’t see where it went.
Transferring ETH from Coinbase to your MetaMask is not a taxable event. It’s moving your own property. But if the exchange reports it as a sale at market value, the 1099-DA will show proceeds for a transaction that created no income.
The IRS can’t tell the difference from the form alone. Your return has to.
Duplicate Reporting Across Exchanges
Bought on Exchange A, transferred to Exchange B, sold on Exchange B. Both exchanges may issue 1099-DAs that include the same asset — one for the “transfer out” and one for the actual sale. The numbers compound.
Why You Can’t Ignore It
The IRS gets a copy of your 1099-DA. If your return doesn’t address the proceeds reported on that form, the IRS computer will notice the discrepancy — and eventually send a CP2000 notice proposing additional tax based on the assumption that every dollar of proceeds is a gain with zero basis.
A CP2000 doesn’t mean you’re being audited. It means you’re being billed. The tax, plus interest, plus potentially accuracy-related penalties. You can respond to it and win — but it’s slower, more expensive, and more stressful than getting the return right the first time.
Ignoring a 1099-DA because “it’s wrong” is not a strategy. The IRS does not know it’s wrong. They match forms to returns. If the return doesn’t reconcile the number on the form, the system flags it.
What To Do When Your 1099-DA Doesn’t Match Reality
Step 1: Pull your complete transaction history. Don’t rely solely on the 1099-DA. Download full CSVs from every exchange and wallet you used. The 1099-DA is a starting point, not the source of truth.
Step 2: Identify the specific discrepancies. Go line by line if you have to. Categorize what’s wrong: missing basis, wallet transfers reported as sales, duplicates. Each error type has a different fix on your return.
Step 3: Document your own cost basis. For positions where basis is blank, you need your own records — purchase confirmations, exchange history going back to original acquisition date, on-chain transaction data. “I don’t have records” is not a defense; it’s just an invitation for the IRS to use $0.
Step 4: Reconcile on your return, not in your head. The return needs to show the proceeds from the 1099-DA accounted for. If $200,000 of the proceeds were from wallet-to-wallet transfers that aren’t taxable events, that needs to be reflected in how the transactions are reported — with the correct gain/loss figures backed by your own records.
Step 5: Don’t paper over it. If your 1099-DA says $340,000 in proceeds and your return shows $12,000 in proceeds, you need a clear paper trail explaining the difference. Missing basis, excluded non-taxable transfers, aggregation differences — all of it should be traceable.
The Practical Reality
The 1099-DA is new. The exchanges are doing their best with incomplete data, novel asset types, and IRS guidance that was still being finalized when they built their systems. The first year of any new reporting form is messy. 1099-B was messy in its early years too.
But messy doesn’t mean ignorable. The IRS is running matching algorithms against these forms right now. The notices will start arriving for anyone whose return doesn’t account for reported proceeds.
If your 1099-DA looks obviously wrong — and a lot of them will — the answer is to reconcile it properly, not to hope no one notices.
This isn’t tax advice, and your specific situation may differ substantially from the general patterns described here. If your 1099-DA numbers look nothing like your actual activity, talk to a tax professional before filing. Getting it wrong in either direction has consequences.
If you want us to look at it, we’re here.
Need help with your crypto taxes? Mike Ring and the BCTP team handle the messy stuff — multi-chain DeFi, 1099-DAs that don’t add up, prior-year amendments. Free consult at cryptotaxprep.io or call 410-320-7348.
This isn’t tax advice. Talk to a professional about your specific situation.
