1099-DA Mistakes: 5 Filing Errors Crypto Investors Should Avoid

5 Mistakes Crypto Investors Make Filing After the 1099-DA Rollout

The IRS now has data from every major exchange. Under the final broker reporting regulations (T.D. 10000, issued June 2024), Form 1099-DA reports your gross proceeds starting with the 2025 tax year — and for assets acquired on or after January 1, 2026, brokers must report your cost basis too. The agency doesn't just know you traded. Increasingly, it knows what you paid.

That's a fundamentally different compliance environment than anything that existed before. And most crypto investors are filing like it's still 2022.

Here are the five mistakes that will get you flagged.

1. Treating IRS Form 1099-DA as a Complete Record of Your Activity

It isn't. A 1099-DA covers on-exchange transactions only — buys, sells, and conversions that happened through a regulated broker. Everything else is invisible to it.

DeFi trades, wallet-to-wallet transfers, staking rewards, liquidity pool activity, NFT transactions, and any off-exchange activity won't appear on your 1099-DA. But the IRS will see whatever does appear and match it against your return. If your return shows only what's on the 1099-DA and you had significant off-exchange activity, the gap shows up immediately.

The scenario that creates real problems: an investor receives a 1099-DA showing $80,000 in proceeds from exchange sales, files based on that, and doesn't mention the $40,000 in DeFi gains that happened in a separate wallet. The IRS doesn't see the DeFi gains — but it does see the exchange gains, compare them to the return, and if the numbers don't reconcile cleanly, questions follow. Don't treat the form as the finish line. Treat it as one input among several.

2. Defaulting to FIFO Instead of optimizing crypto cost basis reporting

Under the per-wallet cost basis rules in IRS Revenue Procedure 2024-28, investors can use specific identification to choose which lot they're selling from. Most people don't bother — they accept the default (which is often FIFO) and may pay more tax than they have to.

Here's why it matters. If you bought 1 ETH at $1,000 in 2020, another at $3,500 in 2021, and another at $1,800 in 2023 — and you're selling one in 2026 when ETH is at $4,000 — your gain depends entirely on which lot you designate. FIFO picks the $1,000 lot and creates a $3,000 gain. Specific identification lets you pick the $3,500 lot and recognize a $500 gain instead.

On a large portfolio, this decision can be worth real money — though the right lot depends on your holding periods, bracket, and broader tax picture. And there's a hard rule: you have to make the specific identification election contemporaneously — at the time of the sale, not retroactively at tax time. If you don't document the lot selection when the transaction happens, you lose the ability to claim it. This is one of the most valuable and most often missed elections in crypto tax.

3. Ignoring Gas Fees as Basis Adjustments

ETH gas fees are not a sunk cost. They're part of your cost basis in the underlying transaction — and tracking them correctly reduces your taxable gain.

When you pay gas to execute a trade, that gas fee adds to the cost basis of the asset you acquired. When you pay gas to sell, that fee reduces your proceeds. Across hundreds of transactions, these adjustments compound into meaningful basis differences.

The math: at a 20% long-term capital gains rate, $5,000 in missed basis can mean roughly $1,000 in unnecessary tax, depending on your bracket and situation. The IRS isn't going to volunteer the correction. You have to build it into your transaction records from the start.

Gas fee tracking is not something most exchange-generated CSV files handle well. It requires pulling data from on-chain records and reconciling it against the corresponding transactions. It's tedious — which is exactly why most people skip it.

4. Applying Wash Sale Rules to Crypto Losses

This is a mistake in the opposite direction — overcounting restrictions that don't actually apply.

The wash sale rule under IRC §1091 applies to securities. Crypto is currently treated as property under IRS Notice 2014-21, not a security. That means selling at a loss and buying back the same token doesn't trigger the wash sale rule — the loss is generally preserved. You can sell Bitcoin at a $10,000 loss, rebuy it the same day, and still claim the loss on your return. No 30-day waiting period, no disallowed loss.

This is a significant planning opportunity that many investors don't use because they assume the stock rules apply. They don't — yet. There are ongoing proposals in Congress to extend wash sale rules to crypto, but as of the 2025 tax year, the rule doesn't apply.

If you have unrealized losses and you want to harvest them without losing your position, crypto's property status is actually an advantage here. Use it.

5. Filing Without Reconciling Crypto Broker Reporting Against Full Wallet History

Exchanges purge history. APIs break. Amended 1099-DAs get issued weeks after the original. None of that is your accountant's fault — but the IRS doesn't care whose fault it is when the numbers on your return don't match what the agency received.

The only audit-proof approach is to build your own transaction log from raw source data: CSV exports from every exchange, on-chain transaction records from every wallet, and a reconciliation that ties everything together before you touch a tax form.

This is not something you can do for the first time in April for a complicated portfolio. The raw data expires, gets overwritten, or requires access to accounts that have been closed. The time to build the log is continuously — every quarter, or at minimum annually before records become hard to recover.

If you're coming to this cold with two years of transactions across five exchanges and three wallets, reconstruction is possible but expensive. The longer you wait, the harder and costlier it gets.

The 1099-DA Is a Starting Point, Not a Filing Strategy

The IRS having your exchange data doesn't simplify crypto taxes — it just means the consequences of getting it wrong are more visible. You're not going to slip through a calculation error now that the agency has the same records your exchange does.

The investors who will get through this era cleanly are the ones who treat their transaction history as a serious financial record, not a pile of CSV files to sort out once a year.

Every mistake on this list traces back to the same root cause: filing from incomplete records in a year when the IRS finally has complete ones.

Crypto Tax Made Easy handles the full picture: multi-exchange reconciliation, DeFi transaction reconstruction, lot selection optimization, and returns built to hold up if the IRS comes asking. If your crypto activity is more complex than a handful of trades, book a consultation through their Sam's List profile before you file — and read what other crypto investors say about working with them first.