Crypto Taxes Grew Up: 1099-DAs, Wallet-by-Wallet Basis, and the End of Plausible Deniability

For years, crypto taxation ran on the honor system: exchanges reported little, investors self-assembled spreadsheets, and plenty of gains simply never met a tax return. That era is over — not because the rules on what’s taxable changed (they mostly didn’t), but because the reporting plumbing finally got built. If you hold digital assets, two structural changes now govern your filing life.

Change 1: The IRS gets a copy now

Custodial exchanges and brokers must issue Form 1099-DA reporting your digital asset sale proceeds — with cost basis reporting phasing in for covered assets. Practically, this puts crypto on the same matching footing as stocks: the IRS computer compares what brokers reported against what your return shows, and mismatches generate automated notices.

Two traps in the transition:

Proceeds without basis. Early-phase 1099-DAs may show what you sold for but not what you paid — especially for coins transferred in from elsewhere. If you don’t supply defensible basis, the notice math assumes basis of zero and taxes the entire proceeds. Sound familiar? It’s the RSU trap’s crypto cousin, and the fix is the same: your records, attached to Form 8949.

Transfers look like sales to no one — and like income to a bad reconciliation. Moving coins between your own wallets isn’t taxable, but a sloppy data trail makes those movements indistinguishable from dispositions. Reconciliation is now the core of crypto tax prep.

Change 2: One big spreadsheet is no longer legal

Under IRS transition rules, investors were required to move from “universal” basis tracking (pooling all holdings across every exchange and wallet) to wallet-by-wallet (account-by-account) basis tracking. Each wallet’s coins now carry their own lots and their own basis; you can’t sell on Exchange A and claim the basis of coins sitting in cold storage.

If you never did the formal allocation of your old universal pool to specific wallets, your current-year lot accounting has a foundation problem — one that’s fixable, but deliberately, not by letting a crypto tax app guess. Specific-lot identification remains available and is where the planning lives (choosing which lots to sell), but it requires the records to support it.

What hasn’t changed (and gets forgotten anyway)

Every disposal is taxable — selling for dollars, swapping coin-for-coin, spending crypto on anything. Buying and holding is not.

Staking rewards, interest, airdrops, and mining are ordinary income at fair market value when received — and that value becomes their basis, so people who ignored the income also carry wrong basis into every later sale.

The wash sale rule still does not apply to crypto as of this writing — losses can be harvested and repurchased immediately, a legitimate advantage over stocks. Proposals to close this exist perennially; use the window while confirming it’s still open.

The digital asset question on page one of the 1040 is answered under penalty of perjury. Answer it accurately.

The cleanup sequence for messy histories

Step 1 — Inventory every exchange account and The IRS now receives broker reports on your crypto sales, and the old “one big spreadsheet” method is no longer allowed. What every crypto investor must fix before filing. wallet, active or dead.

Step 2 — Pull complete transaction histories; exports vanish when platforms do, so get them now.

Step 3 — Establish the wallet-by-wallet allocation from your pre-transition holdings.

Step 4 — Reconcile transfers so the software stops inventing gains.

Step 5 — If prior years have material unreported activity, address it proactively; voluntarily amended returns are treated very differently than matching-notice discoveries.

Romanchuk CPA LLC prepares returns for crypto investors from clean portfolios to multi-wallet archaeology projects. If your basis records wouldn’t survive a notice, book at rfg.tax before the 1099-DA does it for you.

This article is general information, not tax advice for your specific situation. Reporting rules are phasing in — current-year requirements should be confirmed at filing.