Crypto Tax and Digital Asset Updates: What You Need to Know in 2026

Cryptocurrency and digital assets are rapidly evolving, and the regulatory and tax framework around them is evolving just as fast. The 2025 and 2026 tax years represent a genuine inflection point: Form 1099-DA reporting has now begun in earnest, Congress made sweeping changes to which digital asset participants are subject to broker reporting rules, a new federal stablecoin framework became law, and international reporting coordination is tightening through CARF and DAC8.

For accountants advising clients with crypto holdings, this is no longer a niche topic. Digital asset owners who have never worried about tax compliance are now receiving Form 1099-DA in their inboxes, and many of those forms are incomplete or inaccurate. The clients who have a proactive advisor guiding them through these changes will be far better positioned than those who discover the complexity at tax time.

Form 1099-DA: The New Cryptocurrency Reporting Standard

The most immediate development for tax professionals and their clients is the arrival of Form 1099-DA, the IRS's new information return for digital asset proceeds from broker transactions. This form applies to transactions occurring on or after January 1, 2025, with forms issued to taxpayers and the IRS beginning in early 2026.

What brokers must report and when. For 2025 transactions (forms issued in 2026), custodial brokers are required to report gross proceeds only. Cost basis reporting is not required for 2025 transactions, though some brokers may report it voluntarily. Starting with 2026 transactions (forms issued in 2027), brokers must report both gross proceeds and adjusted cost basis for "covered" digital assets, meaning assets acquired and held within the same broker account on or after January 1, 2026. Assets transferred in from another wallet or exchange, or acquired before 2026, remain "noncovered" and cost basis reporting remains optional for those.

The reconciliation challenge. Because basis reporting is not required for 2025 transactions, many 1099-DA forms issued in 2026 will show gross proceeds but blank or incomplete basis fields. The deadline to receive 1099-DA forms was February 17, 2026, though many major exchanges including Coinbase and Kraken missed that deadline and estimated mid-March delivery. The IRS confirmed it will not penalize exchanges for late filing in 2026 provided a good faith effort was made. Accountants should expect reconciliation gaps and should not assume that proceeds on the 1099-DA match the client's actual taxable gain. Taxpayers remain responsible for tracking their own cost basis regardless of what the broker reports.

Who receives a 1099-DA. Centralized crypto exchanges, hosted wallet providers, payment processors, and digital asset kiosks that custody assets for customers are all subject to Form 1099-DA requirements. The form is issued when a client sells, exchanges, or otherwise disposes of a digital asset through one of these platforms. Clients may receive multiple 1099-DAs from different platforms and multiple forms from the same platform for different assets and transactions.

What 1099-DA will not capture. The form does not cover DeFi activity, non-custodial wallet transactions, wrapping, liquidity pool activity, lending, or on-chain staking through non-custodial protocols. These transactions remain the taxpayer's responsibility to track and report, even though no broker-issued form will prompt disclosure. Accountants need to ask clients directly about these activities rather than waiting for a form.

The digital asset question on Form 1040. The IRS continues to require all taxpayers to answer the digital asset question on Form 1040 (and Forms 1041 and 1065). Checking "No" when a client did have reportable transactions remains a significant compliance risk, particularly now that the IRS is receiving 1099-DA data it can match against returns.

The DeFi Reporting Reversal: What Changed

One of the most significant 2025 developments was the congressional repeal of the IRS regulations that would have required decentralized finance brokers to file Form 1099-DA. President Trump signed legislation on April 10, 2025, nullifying these rules under the Congressional Review Act. The repeal applied to DeFi brokers that operate almost entirely on blockchain infrastructure and do not offer traditional on-ramps from fiat currency to digital assets.

This means that decentralized exchanges, non-custodial wallet providers, and similar permissionless infrastructure are not subject to 1099-DA reporting. Centralized exchanges that custody assets and facilitate fiat-to-crypto conversion remain fully subject to reporting obligations. The repeal reduces information reporting to the IRS from the DeFi space but does not eliminate taxpayer obligations. All taxable DeFi activity, including income from liquidity pools, yield farming, staking through non-custodial protocols, and token swaps, remains taxable and must still be reported by the taxpayer. The IRS has also noted that most DeFi activity remains visible on public blockchains, so audit exposure does not disappear simply because a broker is not reporting.

The GENIUS Act: A Federal Framework for Stablecoins

President Trump signed the GENIUS Act in July 2025, establishing the first comprehensive federal regulatory framework for payment stablecoins. The law requires payment stablecoins to be backed 1-to-1 by U.S. dollars or other high-quality liquid assets, subjected to monthly independent attestations, and issued only by entities authorized under the framework. It also definitively classifies payment stablecoins as neither securities nor commodities, removing a significant source of regulatory uncertainty.

For tax purposes, the GENIUS Act itself does not change how stablecoin transactions are taxed. The IRS continues to treat stablecoins as property, meaning that technically a swap from Bitcoin to a stablecoin is a taxable event. The practical impact for accountants is that stablecoin activity is now more mainstream and better-understood, which means more clients are using them and more transactions are potentially taxable. The CLARITY Act (H.R. 3633, passed by the House in July 2025) takes a broader approach, distinguishing "digital commodities" from securities and granting the CFTC primary authority over spot digital commodity markets. As of early 2026 the Senate has not yet passed a companion bill, but the legislative direction is clear.

Global Regulations: CARF and DAC8

The international reporting environment tightened materially as of January 1, 2026. Both the OECD's Crypto-Asset Reporting Framework (CARF) and the European Union's DAC8 directive entered operational implementation on that date, even though formal first information exchanges between tax authorities are not expected until 2027.

Under CARF, crypto-asset service providers, including exchanges, wallet providers, and certain financial institutions dealing in digital assets, must collect user transaction data beginning in 2026. The first cross-border exchanges of that information with tax authorities in participating countries are expected to begin in 2027. The U.S. has not formally adopted CARF as domestic law, but the White House and IRS have indicated that proposed CARF regulations are under development. The current U.S. position recommends excluding DeFi from CARF reporting requirements, which creates some tension with the OECD's own framework language. Accountants advising clients with international crypto exposure should stay current on this because the compliance landscape in 2027 will look materially different from today.

For clients who hold accounts on foreign exchanges or who engage in cross-border digital asset transactions, CARF creates a new dimension of exposure: tax authorities in CARF-participating countries will soon be exchanging client-level transaction data automatically. The same clients who thought international crypto activity was beneath the IRS's radar will find that assumption increasingly difficult to maintain.

Tax Strategies for Digital Asset Investors and Businesses

With crypto tax regulations tightening, investors and businesses must take proactive steps to minimize tax liabilities and ensure compliance.

Tracking and basis management. The IRS now requires wallet-by-wallet (rather than pooled universal) cost basis tracking under Revenue Procedure 2024-28. This means clients who hold crypto on multiple platforms cannot blend their basis across accounts. For clients with years of transaction history across multiple exchanges and wallets, basis reconstruction is a significant undertaking that should be started well before tax season. Accountants should recommend dedicated crypto tax software and should discuss basis allocation method elections (FIFO, LIFO, Specific ID, HIFO) with active traders, as the choice can meaningfully affect tax liability.

Capital gains and tax-loss harvesting. Crypto assets are subject to capital gains tax when sold at a profit. Short-term gains on assets held less than one year are taxed as ordinary income at rates up to 37%. Long-term gains on assets held more than one year are taxed at 0%, 15%, or 20% depending on taxable income (0% threshold for MFJ in 2026: $98,900; 20% threshold: $613,700). Unlike stocks, crypto is not currently subject to wash sale rules under Section 1091, meaning a client can sell a position at a loss for tax purposes and repurchase it immediately without the loss being disallowed. This is a genuine planning opportunity that many clients are not utilizing, and it should be a standard part of any proactive crypto tax conversation.

Staking, mining, and crypto income. The IRS treats staking rewards, mining income, and crypto interest as ordinary income at fair market value upon receipt. Clients involved in mining must also consider self-employment tax implications. Businesses that accept digital asset payments must record the fair market value of each payment as gross income. These are areas where clients frequently underreport, often because they do not realize the income is recognized at receipt rather than at the time of eventual sale.

The meme coin and NFT clarification. In February 2025, the SEC issued guidance classifying meme coins as collectibles rather than securities when their value is driven by sentiment rather than managerial efforts. This does not change federal income tax treatment, but it reduces regulatory risk for clients holding these assets. NFTs continue to be treated as property for tax purposes, and gains or losses on NFT transactions must be reported.

From Jackie's Practice: When Crypto Becomes an Advisory Conversation

A note from Dr. Jackie Meyer, founder of TaxPlanIQ

Crypto tax used to be the conversation I dreaded in client meetings. A client would mention they'd done "some trading" and I'd think: this is going to be a records nightmare and they probably haven't tracked anything. That experience is exactly why I see it now as one of the best advisory opportunities available, because the gap between what most clients know about their crypto tax obligations and what they actually owe is enormous, and closing that gap is exactly what a trusted advisor does.

The year Form 1099-DA arrived in client inboxes changed everything. Now a client who has been casually trading on Coinbase for three years is getting a form that the IRS also receives. If their return doesn't reconcile with that form, they have a problem. And if they were also doing anything on a decentralized exchange or holding assets in a private wallet, none of that will be on the 1099-DA at all, which creates a different kind of problem. Both situations create an opening for a proactive advisory conversation.

The discovery question I recommend using is direct: "Have you received any Form 1099-DA or crypto tax statements from exchanges this year, and do you use any wallets or platforms that wouldn't issue a tax form?" That second part of the question is what separates compliance from advisory. Anyone can import a 1099-DA into tax software. The accountant who asks about the other activity, explains why it still matters, and helps the client understand what they owe before the IRS figures it out first, that is the accountant who gets a referral.

I have seen situations where a client had meaningful unreported staking income for three consecutive years without realizing it was taxable at receipt. By the time we addressed it proactively, we were able to work with amended returns and structured payments rather than waiting for a notice. The advisory fee for that engagement was $6,500. The compliance-only approach would have been a $350 tax return.

How TaxPlanIQ Can Help with Crypto Tax Planning

With new cryptocurrency tax regulations fully in effect, accountants need the right tools to help clients navigate digital asset taxation efficiently.

TaxPlanIQ helps accountants identify tax-saving strategies across a client's full financial picture, including digital asset holdings. From modeling capital gains timing strategies to identifying tax-loss harvesting opportunities and quantifying advisory fees using the ROI Method, TaxPlanIQ streamlines the process of turning complex tax situations into clear, value-driven advisory engagements.

Ready to optimize your crypto tax strategy? Schedule a demo of TaxPlanIQ today.

Looking Ahead: The Future of Cryptocurrency Taxation

The 2026 tax year is when crypto reporting becomes genuinely harder to avoid. Form 1099-DA is live for centralized exchange activity, cost basis reporting becomes mandatory for covered assets in 2027, CARF data exchanges between international tax authorities begin in 2027, and the regulatory framework is converging around a model where digital asset transactions are treated as normal financial events subject to normal reporting expectations.

Accountants who treat crypto as a specialty area outside their scope are increasingly leaving money on the table and leaving clients exposed. The clients who hold digital assets are often the same business owners and high earners who have the most to gain from comprehensive tax planning. A proactive conversation about their crypto position is an entry point to a broader advisory relationship, and the 2026 regulatory environment gives that conversation genuine urgency.

Frequently Asked Questions

Q1: What is Form 1099-DA and what does it mean for my crypto clients?

Form 1099-DA is the IRS's new information return for digital asset proceeds from broker transactions. Centralized crypto exchanges and other custodial brokers began issuing it in early 2026 for 2025 transactions. For 2025 activity, the form reports gross proceeds only, not cost basis. Starting with 2026 transactions (forms issued in 2027), covered digital assets will require full basis reporting as well. The IRS receives a copy of every 1099-DA, meaning the agency can now match reported crypto proceeds against a taxpayer's return much as it does with stock sales. Clients whose returns do not reconcile with their 1099-DA data face CP2000 notices and potential audit exposure. Importantly, the form will not capture DeFi activity, non-custodial wallet transactions, or assets transferred between exchanges, so the 1099-DA represents a floor, not a ceiling, on what needs to be reported.

Q2: Are DeFi transactions still taxable after Congress repealed the DeFi broker rules?

Yes, fully. Congress repealed the IRS regulations that would have required DeFi brokers to issue Form 1099-DA, meaning those platforms are not required to file information returns. However, the congressional repeal does not affect taxpayer obligations. Any income earned or gains realized through DeFi activity, including swaps, liquidity pool rewards, yield farming income, and non-custodial staking, remains taxable and must be reported by the taxpayer. The repeal reduces third-party reporting to the IRS from DeFi platforms, but it does not eliminate the underlying tax liability or reduce audit risk, since most on-chain activity is publicly visible on the blockchain.

Q3: What changed about stablecoin regulation and does it affect taxes?

The GENIUS Act, signed in July 2025, created the first federal regulatory framework for payment stablecoins, requiring 1-to-1 backing by high-quality liquid assets and monthly independent attestations. It clarifies that payment stablecoins are not securities or commodities. For tax purposes, stablecoin transactions remain taxable events. A swap from Bitcoin into a stablecoin is technically a disposition of Bitcoin at fair market value, triggering gain or loss. The GENIUS Act does not change this. What it does do is legitimize stablecoin use for everyday transactions, which means more clients are using them and more potentially taxable events are being created without the client realizing it.

Q4: What is CARF and should my clients with international crypto exposure be concerned?

CARF is the OECD's Crypto-Asset Reporting Framework, a global standard for automatic exchange of digital asset transaction information between tax authorities. It entered operational implementation on January 1, 2026, meaning participating crypto-asset service providers around the world are now collecting the data they will exchange with tax authorities starting in 2027. Countries that have adopted CARF include those in the European Union (through DAC8), Canada, Australia, and others. Clients who hold accounts on foreign exchanges, use international platforms, or engage in cross-border digital asset activity will have their transaction data reported to their home country tax authority through CARF exchanges beginning in 2027. The U.S. has not yet formally adopted CARF as domestic law but has indicated proposed regulations are in development. Accountants with clients in this situation should flag the 2027 data exchange timeline now and ensure those clients' reporting is in order.