The 1099-DA $0 Basis Trap: What Crypto Investors and CPAs Need to Know for Tax Year 2025

By Greg Monaco, CPA/MBA | February 26, 2026 | monacocryptotax.com

This article is for informational purposes only and does not constitute tax advice.

A blank cost basis on your 1099-DA does not mean you paid $0. It means you could be overpaying thousands of dollars in taxes on gains you never actually had.

Who this applies to: Traded crypto on a centralized exchange in 2025 / Moved assets between exchanges or to/from self-custody / Used stablecoins / Received staking or earn rewards (your tax obligations exist even though brokers are not required to report certain staking-related transaction structures on Form 1099-DA for TY2025 per IRS Notice 2024-57) / Business entities holding crypto on the balance sheet

Note: For TY2025, Form 1099-DA will generally reflect activity on custodial platforms, hosted wallet providers, payment processors, and kiosks, though coverage varies by platform and transaction type. The DeFi broker reporting rule (T.D. 10021) was repealed by Congress via the Congressional Review Act (H.J.Res.25, signed April 10, 2025) and has no legal force. This repeal relates to the non-custodial DeFi "trading front-end services" rule and does not eliminate 1099-DA reporting by custodial brokers for TY2025. Pure on-chain DeFi activity without a reporting broker intermediary generally will not appear on a 1099-DA.

Three things to know right now

Form 1099-DA for TY2025 reports gross proceeds (Box 1f, which reflects gross proceeds reduced by allocable transaction fees, commissions, and other allocable costs per Reg. §1.6045-1, and may also reflect the fair market value of non-cash consideration for crypto-to-crypto swaps) for reportable broker-effected dispositions, subject to exceptions and transition carve-outs in IRS guidance including Notice 2024-57. Basis reporting is entirely voluntary for TY2025. The IRS 1099-DA instructions state explicitly that brokers are not required to report basis information for sales effected in 2025. Mandatory basis reporting begins for covered digital assets acquired on or after January 1, 2026. Some brokers may voluntarily report basis for assets acquired and sold on-platform in 2025. If yours does, verify it before relying on it.
Blank basis (and occasionally an erroneous $0) is common this year. You must reconstruct your actual cost from your own records or you will end up reporting phantom gains.
The IRS Form 8949 instructions state categorically that all digital asset transactions belong in boxes G/H/I and J/K/L, not in boxes C or F. If you received a Form 1099-B for a tokenized asset, see the note in Check 1 below regarding an unresolved routing ambiguity for that specific situation.

Save this article now. If you already have your 1099-DA, use it today. If yours hasn't arrived yet, late and corrected forms are a real possibility in year one.

Tax Year 2025 is the most significant shift in IRS crypto reporting I have ever seen. Form 1099-DA is being issued for the first time, and the unreported basis problem it creates is already showing up in client files. This is your playbook for navigating it accurately. The IRS published Fact Sheet FS-2025-06 on September 25, 2025 to help taxpayers prepare for 1099-DA. This article goes deeper.

Section 1: Why Tax Year 2025 Is Different

The Infrastructure Investment and Jobs Act of 2021 expanded the definition of "broker" to include digital asset exchanges. The IRS used its regulatory authority to implement that mandate beginning with Tax Year 2025. Form 1099-DA is how that gets done.

Here is what most people are missing.

For TY2025, brokers must report gross proceeds for reportable broker-effected dispositions, with several exceptions and transition carve-outs in IRS guidance, including Notice 2024-57. Basis reporting is entirely voluntary for 2025. The IRS instructions are explicit: brokers are not required to report basis information for sales effected in 2025. Mandatory basis reporting begins for covered digital assets acquired on or after January 1, 2026, sold in 2026, appearing on forms issued in early 2027. Even after 2026, transferred-in and pre-2026 acquired lots remain noncovered, so blank basis can persist on 1099-DAs well beyond this first year. Some brokers may voluntarily provide basis for assets acquired and sold on their platform in 2025, but most are not yet doing so. This makes 2025 the Year of the Gap: proceeds are widely reported, basis largely is not, and you have to supply it yourself.

Recipient copies of Form 1099-DA were due February 17, 2026, the same furnishing deadline category as Form 1099-B under the IRS general instructions. Notice 2024-56 provides penalty and backup withholding relief for brokers making good-faith efforts to file and furnish correctly for TY2025. Notice 2025-33 subsequently extended and modified that relief, pushing backup withholding deferral through calendar year 2026 and extending additional relief into 2027. Late and corrected forms are a real possibility this first year. Do not wait for corrections to start reconciling.

Section 2: The $0 Basis Trap and Why It Happens

A blank or $0 cost basis on your 1099-DA does not mean you paid $0. It means your broker did not or could not report it. You and your preparer have to reconstruct it from your own records. The 1099-DA instructions explicitly direct brokers to enter $0 in Box 1g only if the asset's basis is actually zero. If you see $0 on your form and you know you paid for the asset, that is a broker error, not a reflection of your actual cost.

The "Applicable checkbox on Form 8949" field on your 1099-DA uses one-letter codes to direct you to the correct Form 8949 box. Here is how to read them for TY2025:

Code Y on the 1099-DA: Per the 1099-DA instructions, Code Y signals that the broker cannot determine whether the recipient should check Box H or Box K because the holding period is unknown. For TY2025, brokers that are not reporting basis information are instructed to use Code Y in the applicable checkbox field — the instructions state directly: "If you do not report basis information... use code Y in the box 'Applicable checkbox on Form 8949.'" In practice this also typically coincides with unknown or undetermined holding period data, so Code Y appears on most 1099-DAs issued this year. Do not assume Code Y tells you anything definitive about your holding period. You must determine short vs. long-term from your own records and use Box H (short-term) or Box K (long-term) on Form 8949. If you genuinely cannot establish the acquisition date, the conservative practitioner convention is to treat the position as short-term and report in Box H, though the IRS has not issued an explicit default rule on this point.

Note: The 2025 Form 8949 instructions reference Code X in certain contexts for unknown holding period, while the 1099-DA instructions use Code Y. Treat this as a drafting inconsistency and follow the code printed on your actual 1099-DA.

Code H or K on the 1099-DA: The broker has indicated your holding period on the form but did not report basis. Use the corresponding Form 8949 box and supply your own basis in Column (e).

Code G or J on the 1099-DA: Basis was reported to the IRS. Use the corresponding Form 8949 box and still verify accuracy before filing.

CPA note on Adjustment Code B, Code E, and Box 1f fees

Three points that trip up even experienced preparers.

On Code B: Use it in Form 8949 Column (f) only when a specific basis figure was reported on the 1099-DA but is incorrect. When basis is simply blank or missing, which is most TY2025 transactions, enter your reconstructed cost in Column (e) and leave Column (f) blank. No adjustment code is needed because you are providing an original figure, not correcting a reported one. Some tax software defaults to Code B or Code O to force a reconciliation on blank-basis 1099-DAs. Follow your software's mapping and verify against the IRS Form 8949 instructions for your specific box.

On Code E: Any time you enter an amount in Form 8949 Column (g), IRS instructions require a corresponding letter code in Column (f), and most e-filing systems will reject a return missing it. If you are adjusting for sell-side transaction costs not already captured in Box 1f, enter Code E in Column (f) and enter the adjustment as a negative number in parentheses in Column (g). You are reducing an artificially high proceeds figure, so the adjustment must decrease the gain. Entering it as a positive number is a common error that inadvertently increases taxable gain.

On Box 1f fees: Brokers are required under Reg. §1.6045-1 to reduce gross proceeds by allocable transaction costs before reporting in Box 1f. Start with Box 1f as your proceeds figure, except for NFT creators and minters where the broker used optional aggregate reporting, in which case proceeds appear in Box 11c and Box 1f is left blank per the 1099-DA instructions. Only make a further adjustment on Form 8949 Column (g) using Code E in Column (f) for transaction costs not already reflected in Box 1f. Adding fees on top of an already-reduced Box 1f number is double counting and one of the more common reconciliation errors I see.

What the trap looks like in real numbers

You sold BTC for $12,000. Your 1099-DA shows $12,000 in proceeds and a blank basis. Your actual cost was $9,000, making your real gain $3,000. If you file without entering that cost, you voluntarily overpay on $9,000 of phantom gain. When you correctly enter your reconstructed $9,000 basis in Column (e), you are filling in information the broker did not provide, not contradicting a reported figure. Keep solid documentation. The IRS may request substantiation through correspondence or examination, and your records are your defense.

If you only do one thing this filing season: rebuild cost basis for every disposition showing blank or $0 basis, especially anything transferred in from another wallet or exchange.

Section 3: Four Checks Before You File

Check 1: Know your Form 8949 box

The IRS Form 8949 instructions are categorical: digital asset transactions should not use Box C or F. All digital asset transactions should use Box G, H, or I for short-term and Box J, K, or L for long-term. For most 1099-DA filers, the routing is straightforward:

Box G / Short-term: 1099-DA received, basis WAS reported
Box H / Short-term: 1099-DA received, basis NOT reported (widely used in 2025)
Box I / Short-term: Digital asset transaction not reported on Form 1099-DA or Form 1099-B
Box J / Long-term: 1099-DA received, basis WAS reported
Box K / Long-term: 1099-DA received, basis NOT reported (widely used in 2025)
Box L / Long-term: Digital asset transaction not reported on Form 1099-DA or Form 1099-B

Note for tokenized assets: The 1099-DA instructions explicitly allow brokers to report sales of tokenized assets for cash on either Form 1099-DA or Form 1099-B for TY2025. If you receive a Form 1099-B for a tokenized asset, the routing question shifts to Form 8949: boxes G and J reference "reported on Form(s) 1099-DA" while boxes A and D reference "reported on Form(s) 1099-B," creating a genuine ambiguity the IRS has not explicitly resolved. The broader Form 8949 instructions state categorically that all digital asset transactions belong in the G/H/I and J/K/L boxes, which would point to the digital asset boxes regardless of which form you received. However, routing a 1099-B to the wrong boxes could trigger an AUR mismatch notice. If you receive a Form 1099-B for a tokenized asset, verify how your tax software handles the routing, document your position, and consider consulting your tax advisor before filing.

Box H and Box K are the hero checkboxes for most 2025 filers receiving Form 1099-DA, because basis is not being widely reported by brokers this year. Bitcoin has been around since 2009 and many sellers held for years, so do not reflexively default to Box H. Determine your actual holding period from your records first, then route to H (short-term) or K (long-term) accordingly.

CPA shortcut for Code G/J transactions with no adjustments: If a transaction is reported in Box G or J with basis reported to the IRS and you have no adjustments to make, you may be able to aggregate those transactions directly on Schedule D lines 1a (short-term) or 8a (long-term) without listing each one individually on Form 8949. Verify this applies to your specific situation before using the shortcut, as any transaction requiring an adjustment must still go through Form 8949.

Check 2: The transfer trap

This is the number one source of basis errors I am seeing this season. When you move crypto from a cold wallet, hardware device, or another exchange and later sell it on the receiving platform, that platform typically has no record of your original purchase price or purchase date. Transferred-in assets are noncovered, meaning they are generally not required to have basis reported, and the receiving broker often will not have that information available in any event.

The Date Acquired field on your 1099-DA (Box 1d) may be blank or unreliable for transferred-in lots. The IRS allows it to be blank for several valid reasons: unknown acquisition date, assets acquired on multiple dates, noncovered status, or optional reporting methods. Boxes 12a and 12b flag transfer-in activity specifically. Box 12b may itself be blank when digital assets were transferred in on a variety of dates, per IRS instructions; as a practical matter it may also be blank when the transfer date is simply unknown to the broker or when the asset is noncovered. A blank 12b does not mean no transfer occurred. Treat any line with 12a or 12b activity as high risk and verify everything using your own records.

One important rule that changed for 2025: Rev. Proc. 2024-28 provides a safe harbor for allocating unused basis to specific wallets and accounts as of January 1, 2025. Section 3.10 of the Rev. Proc. defines "as of January 1, 2025" as immediately after the close of the taxpayer's day on December 31, 2024. The per-wallet and per-account basis tracking requirement is now in effect. You can no longer aggregate basis across all wallets and exchanges as one pool. If you held BTC on Coinbase and BTC on a Ledger, those are separate basis pools.

Two allocation methods exist under the safe harbor with different documentation requirements. For the Global Allocation method, the methodology must have been documented in books and records before January 1, 2025. The actual mathematical application of that methodology to remaining units must then be completed by the later of the date and time of the first 2025 transaction in that asset type or the return due date including extensions, per Section 5.02(5)(b) of the Rev. Proc. If you did not document your methodology before January 1, 2025, you cannot elect Global Allocation retroactively.

For the Specific Unit Allocation method, Notice 2025-7 (issued December 31, 2024) provides important temporary relief for all of 2025: taxpayers may make adequate identification of specific lots on their own books and records rather than needing to communicate specific lot selections to the broker, because most brokers did not have the technology to accept specific identification instructions by January 1, 2025. This relief expires December 31, 2025; starting January 1, 2026, brokers must be equipped to handle specific identification. For the timing requirement, Section 5.02(4)(a) of Rev. Proc. 2024-28 explicitly requires that specific unit allocation documentation be completed before the date and time of the first sale, disposition, or transfer of that asset type on or after January 1, 2025, or by the return due date including extensions, whichever is earlier. This is a regulatory requirement, not a conservative interpretation: if you traded Bitcoin at 10:00 AM on January 10, 2025, your Bitcoin allocation had to be locked in before that exact moment. Contemporaneous pre-trade documentation is the only approach that eliminates the retroactive cherry-picking argument entirely.

Check 3: What is and is not on your 1099-DA

Stablecoins: Stablecoin sales and exchanges are taxable dispositions, even if the net change is minimal. Brokers may use the Alternative Reporting Method for qualifying stablecoins. Under this method, the $10,000 threshold applies specifically to designated stablecoin sales (stablecoin-to-fiat and stablecoin-to-stablecoin), while stablecoin-to-crypto swaps are non-designated and treated separately. If a broker elects this method and a customer's aggregate designated stablecoin sales with that broker are at or under $10,000 for the year, those sales are not required to be reported. If the aggregate exceeds $10,000, the broker must report. Note that the $10,000 threshold is per broker, so a client with $8,000 in designated stablecoin sales on Coinbase and $8,000 on Kraken may receive no stablecoin 1099-DAs at all even though their combined total is $16,000. If you do receive a stablecoin 1099-DA, check boxes 11a and 11b to see if the aggregate alternative method was used. Either way, your tax obligation on each underlying transaction still exists and Form 8949 still requires the detail.

Staking and earn rewards: Brokers are not required to report certain staking-related transaction structures on Form 1099-DA for TY2025 under Notice 2024-57. Staking rewards themselves are not reported on 1099-DA regardless. Neither changes your tax obligation: per Rev. Rul. 2023-14, staking rewards are taxable income in the year of receipt and must be reported from your own records. You might receive a 1099-MISC, a 1099-INT, or another statement. If no form was issued, the income is still reportable.

Payment processors and de minimis thresholds: For non-stablecoin, non-NFT digital asset transactions through PDAPs, the $600 de minimis threshold is an aggregate annual figure per customer. Optional method exclusions for stablecoins and specified NFTs are applied first; remaining non-excluded PDAP sales are then tested against the $600 threshold. The de minimis threshold affects only the broker's reporting obligation. Your obligation to report every taxable disposition remains regardless of whether you receive a form. Note: buying crypto with fiat currency is not a taxable event. It only establishes your cost basis.

Wash sales: Good news for TY2025 loss harvesting. Standard cryptocurrencies like Bitcoin and Ethereum are still classified as property under IRS guidance, not securities. IRC Section 1091 wash sale rules apply to stocks and securities, not property. That means crypto investors can still legally sell a digital asset at a loss and immediately repurchase it without triggering the 30-day wash sale deferral for the 2025 tax year. The Lummis amendment to extend Section 1091 to digital assets was not included in the final One Big Beautiful Bill Act signed July 4, 2025. Standalone bill S. 2207 was introduced June 30, 2025 and carries those same provisions — it did not pass for TY2025 but is worth tracking for future years.

A few additional nuances: Form 1099-DA does include a Box 1i for wash sale loss disallowed, which per the 1099-DA instructions applies specifically to digital assets that already qualify as securities under current law, such as tokenized equities, not standard cryptocurrency. Wrapped tokens such as wBTC and liquid staking tokens such as stETH occupy a gray zone where the analysis is fact-specific and unsettled. If your harvesting strategy involves these assets, discuss the specific facts with your CPA before filing. Additionally, other anti-abuse doctrines including the Economic Substance Doctrine and Step Transaction doctrine can still be applied by the IRS to challenge transactions that lack genuine economic substance beyond tax avoidance.

Scope reminder: Form 1099-DA covers broker-effected activity on reporting brokers, which typically means custodial platforms plus certain other broker categories such as payment processors and kiosks. Coverage varies by platform and transaction type, so expect gaps even within custodial platforms. The DeFi broker reporting rule was repealed by Congress (H.J.Res.25, signed April 10, 2025) and does not eliminate 1099-DA reporting by custodial brokers. Pure on-chain DeFi activity without a reporting broker intermediary generally will not appear on 1099-DAs. Your return can legitimately differ from the 1099-DA and every difference needs to be documented.

Check 4: Reconcile against your raw CSV

Download your full transaction history from every exchange you used. Box 1f on your 1099-DA reflects gross proceeds reduced by allocable transaction costs before reporting under Reg. §1.6045-1. Start with Box 1f as your proceeds figure. Exception: for NFT creators and minters where the broker used optional aggregate reporting, proceeds appear in Box 11c rather than Box 1f. If transaction costs were not fully reflected in Box 1f, enter Code E in Column (f) and a negative adjustment in parentheses in Column (g). Do not subtract fees again from a Box 1f number that already reflects them.

For basis: add buy-side fees and transaction costs to your cost basis. Treat sell-side fees as Code E adjustments reducing proceeds in Column (g) if not already captured in Box 1f, not as additions to basis.

Run a 3-way reconciliation. In the crypto world, unreported basis is sometimes called ghost basis, meaning the cost you actually paid but that does not appear on any form the IRS received:

Source 1, Form 1099-DA: The IRS view of your proceeds from reportable broker-effected sales. Basis absent for most transactions, staking and DeFi excluded, de minimis and optional method carve-outs apply.

Source 2, Exchange CSV or API: The broker's full transaction record. This is where ghost basis most often hides.

Source 3, On-chain and wallet data: Ground truth for self-custody activity. Largely absent from 1099-DA and must be self-reported.

The goal is not to match the form. It is to file an accurate return and document every discrepancy.

Section 4: The New Jersey Factor

For NJ crypto investors, basis reporting errors are not just a federal problem. They compound at the state level in two ways that are easy to miss.

NJ's graduated rate schedule reaches 10.75% for income over $1 million for both single filers and married filing jointly. For investors at the very top of the combined rate structure, the federal 37% rate plus 3.8% Net Investment Income Tax (applicable above MAGI thresholds) plus 10.75% NJ produces a combined short-term rate exceeding 51%. Even for NJ investors below that top bracket, the combined federal and state exposure on a phantom gain is significant.

Here is the one most people do not know. In New Jersey, crypto gains and losses fall into the "Net gains from disposition of property" category. You can net gains against losses within that category during the same tax year. However, if the category nets to a loss overall, NJ effectively treats it as zero on your NJ-1040. Net losses in this category cannot be carried back or carried forward, and they cannot offset income in any other category such as wages, interest, or dividends. The loss simply does not flow through. You can and should net all gains and losses within the category first. It is only when that netting produces an overall loss that NJ treats the result as zero.

This is meaningfully different from federal treatment, which allows a $3,000 capital loss deduction against ordinary income plus indefinite carryforwards. If your preparer assumes NJ follows federal capital loss rules, you may be significantly miscalculating your state liability.

One additional note: Form 1099-DA is not included in the Combined Federal/State Filing Program for TY2025. No state revenue department will automatically receive your 1099-DA data through IRS transmission this year. Keep your records and your state return consistent with your federal filing.

Quick FAQ

If my 1099-DA shows blank or $0 basis, do I just match it?

No. A blank basis means the broker did not provide that information — it is not a figure reported to the IRS that you need to match. Enter your reconstructed cost in Column (e) of Form 8949 using Box H or K. Keep solid documentation. If you see $0 in Box 1g and you actually paid for the asset, that is a broker error — the instructions direct brokers to enter $0 only when basis is genuinely zero.

Are stablecoin transactions taxable?

Yes. Exchanging or selling a stablecoin is a taxable disposition regardless of the net change. If your broker used the optional alternative reporting method, those designated stablecoin sales may not appear on a 1099-DA when aggregate proceeds stay at or under $10,000 with that broker. Your reporting obligation still exists regardless.

Do transfers between my own wallets trigger a taxable event?

No, a transfer is not a disposition. But it creates basis and holding period risk when records are incomplete. Document every transfer with the original purchase price and date.

What if I did not receive a 1099-DA?

Your transactions are still taxable and reportable. Use Box I for short-term or Box L for long-term on Form 8949 for digital asset transactions not reported on any information return, and keep your exchange CSV as documentation.

Do wash-sale rules apply to crypto for TY2025?

Not for standard cryptocurrency. Bitcoin, Ethereum, and most other digital assets are classified as property, not securities. IRC Section 1091 wash sale rules apply to stocks and securities, not property. Tax-loss harvesting in crypto remains a viable strategy for TY2025. Wrapped tokens and liquid staking tokens are a fact-specific gray area and should be reviewed with your CPA.

Will my staking or DeFi activity appear on my 1099-DA?

No. The DeFi broker reporting rule was repealed by Congress (April 10, 2025). Brokers are not required to report certain staking-related structures on Form 1099-DA for TY2025 under Notice 2024-57, and staking rewards are not reported on 1099-DA regardless. Your tax obligations on all of this income are not deferred. Report based on your own records.

Need a CPA to review your 1099-DA?

The IRS now has standardized third-party proceeds reporting for digital assets at a scale it has never had before. The margin for error is smaller than it has ever been.

If you want a line-by-line review of your 1099-DA against your exchange CSV before you file, visit monacocryptotax.com or reach out via DM. Save this article — you will want it when your forms arrive.

Informational only, not tax advice.

Gregory Monaco, CPA/MBA | NJ CPA License #20CC04711400 | Firm License #20CB00789800 | Crypto Tax: monacocryptotax.com | Full-Service CPA: monacocpa.cpa

Posted Feb 26, 2026, 1:59 PM UTC