Section 6045(f): Form 1099-DA, Deadlines, and Penalties

The digital asset broker reporting rules require custodial cryptocurrency platforms and similar intermediaries to report customer sales and exchanges of digital assets to the IRS on Form 1099-DA, with gross proceeds reporting starting for 2025 transactions and cost basis reporting phasing in for assets acquired on or after January 1, 2026.¹ The rules sit in Section 6045 of the Internal Revenue Code, expanded by the Infrastructure Investment and Jobs Act of 2021 to fold digital assets into the same broker reporting framework that already covers stocks and bonds.²

One quick boundary before going further: Section 6045(f), which some searches point to, governs reporting of payments to attorneys and has nothing to do with crypto. The digital asset rules live in Section 6045(a), (c)(1)(D), and (g)(3).²

Who Counts as a Digital Asset Broker

Under Section 6045(c)(1)(D), a broker includes any person who, for consideration, regularly provides services effectuating transfers of digital assets on behalf of another person.² The IRS uses a broad definition of “digital asset” itself: any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology, broad enough to cover cryptocurrencies like Bitcoin and Ethereum, stablecoins, and many non-fungible tokens.³

In practice, this captures centralized digital asset trading platforms, custodial wallet providers that store private keys for users, and digital asset payment processors. The common thread is that these entities both facilitate transactions and can collect customer identity information. Treasury finalized regulations in July 2024 requiring custodial brokers and brokers acting as principals to report digital asset transactions.⁴

Non-custodial participants sit outside the rules. A later regulation attempted to sweep certain decentralized finance front-end providers into the broker definition, but Congress repealed that rule under the Congressional Review Act and President Trump signed the repeal into law. The repeal also prohibits any future administration from issuing a similar rule without new legislation.⁵ So purely non-custodial software providers, hardware wallet manufacturers, and validators involved in mining or staking are not treated as brokers. If you trade on a decentralized exchange through a non-custodial interface, no broker report is generated.

What Form 1099-DA Reports

Form 1099-DA, Digital Asset Proceeds From Broker Transactions, is the designated form.⁶ It captures sales, exchanges, and other dispositions of digital assets. It does not report the mere transfer of an asset to a personal wallet. Moving Bitcoin from a centralized exchange to your own hardware wallet is not a taxable event and does not trigger a 1099-DA.

Reported information includes the customer’s name, address, and taxpayer identification number, the type and quantity of digital asset sold, the date of the transaction, and the gross proceeds. The broker also indicates whether the asset was a covered or noncovered security, which determines whether cost basis appears on the form.¹

When a customer sells digital assets that were previously transferred into the broker’s custodial account from elsewhere, additional fields come into play. Box 12a captures the number of units transferred in, and Box 12b records the date of that transfer. These help the IRS and the taxpayer distinguish assets purchased on the platform from assets that arrived from an outside source.¹

When the Rules Take Effect

The IRS is phasing in requirements rather than turning everything on at once.

2025 transactions: Brokers must report gross proceeds from digital asset sales. Cost basis reporting is voluntary.¹
2026 transactions and beyond: Gross proceeds and cost basis reporting become mandatory for covered securities. Basis reporting for noncovered securities remains voluntary.¹

A “covered security” for digital assets generally means an asset acquired on or after January 1, 2026, through a transaction in the same broker account where it’s held. Assets purchased before 2026, or transferred in from an outside wallet, are treated as noncovered. Brokers have no obligation to report cost basis for noncovered assets, so many taxpayers will receive a 1099-DA showing proceeds but no basis. That does not excuse you from reporting the correct basis on your own return.

The Transfer Gap Between Brokers

Section 6045A of the Internal Revenue Code normally requires brokers to pass along transfer statements with cost basis information when a security moves between them. For stocks and bonds this works because each broker can identify the security and its acquisition details. Digital assets are different, and Treasury concluded in its final regulations that they should generally be exempt from the Section 6045A transfer statement requirements. The stated reason was that “it is unclear at this point how digital asset brokers would be able to provide the necessary information to make basis reporting work efficiently” for broadly tradeable digital assets.⁴

If you move Bitcoin from one exchange to another, the receiving exchange has no obligation to obtain your cost basis from the sending exchange and will treat the transferred asset as noncovered. Keep your own records of acquisition dates and prices for any digital asset you move between platforms. The receiving broker will not have that information and will not report it to the IRS.

Broker Filing Deadlines

Brokers filing Form 1099-DA follow the same calendar as other information returns. For tax year 2025 transactions reported in 2026, the deadlines are:

Electronic filing with the IRS: March 31, 2026
Paper filing with the IRS: February 28, 2026, which shifts to March 2, 2026, because February 28 falls on a Saturday
Furnishing statement to the customer: February 15, 2026, which shifts to February 17, 2026, because the 15th is a Sunday⁷

Any broker required to file ten or more information returns during the calendar year must file electronically.⁸ The ten-return threshold counts all information return types in the aggregate, not just 1099-DAs, so virtually every platform in this space will need to e-file.

Backup Withholding During the Transition

When a customer fails to provide a certified TIN, or when the name and TIN don’t match IRS records, brokers generally must withhold 24% of reportable proceeds. For digital assets, the IRS has granted transition relief: brokers are not required to perform backup withholding on digital asset sales during 2025 and 2026, even without a certified TIN.

The grace period ends in 2027. For accounts opened before January 1, 2026, brokers can avoid backup withholding by running existing customer name-and-TIN combinations through the IRS TIN Matching Program. A confirmed match means no backup withholding is required for 2027 digital asset sales. Accounts that fail to match, or where the customer never provided a TIN, will trigger the 24% withholding on any sale proceeds. Brokers should be collecting certified TINs through Form W-9 now. Waiting until 2027 creates a compliance problem when the relief expires.

Penalties for Noncompliance

Brokers that fail to file correct information returns with the IRS or furnish correct statements to customers face per-return penalties that escalate with delay. The IRS assesses these penalties separately for each missing or incorrect return and each missing or incorrect customer statement, so a broker handling thousands of accounts can accumulate substantial liability quickly.⁹

For returns due in 2026:

Corrected within 30 days of the due date: $60 per return
Corrected after 30 days but by August 1: $130 per return
Filed after August 1, or not filed at all: $340 per return
Intentional disregard: $680 per return, with no maximum cap⁹

Annual maximum penalties are capped for the first three tiers, with lower caps for small businesses (gross receipts at or below $5 million) and higher caps for large businesses. Intentional disregard carries no maximum regardless of business size.¹⁰

Reasonable Cause Defense

A broker can request a penalty waiver by showing the failure was due to reasonable cause and not willful neglect. The standard is demanding. The broker must show either that significant mitigating factors existed or that the failure arose from events beyond its control.¹¹

Meeting either prong alone is not enough. The broker must also prove it acted in a responsible manner both before and after the failure: exercising the standard of care a reasonably prudent person would use, taking significant steps to prevent the failure, and rectifying it promptly once discovered. The IRS generally considers a correction prompt if it happens within 30 days of discovery.¹¹

The defense works best for brokers that can document their compliance efforts: written policies, system audits, TIN solicitation records, and timely correction of errors once identified. A broker that simply ignored the requirements will not qualify, and the uncapped intentional disregard penalty exists for that scenario.

1
Internal Revenue Service. Instructions for Form 1099-DA (2025)
2
Office of the Law Revision Counsel. 26 USC 6045 – Returns of Brokers
3
Internal Revenue Service. Digital Assets
4
Federal Register. Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions
5
U.S. House of Representatives. Carey Bill to Eliminate Burdensome IRS DeFi Crypto Broker Rule Signed Into Law by President Trump
6
Internal Revenue Service. About Form 1099-DA, Digital Asset Proceeds From Broker Transactions
7
Internal Revenue Service. 2025 General Instructions for Certain Information Returns
8
Internal Revenue Service. E-file Information Returns
9
Internal Revenue Service. Information Return Penalties
10
Internal Revenue Service. Information Return Penalties
11
eCFR. 26 CFR 301.6724-1 – Reasonable Cause