Crypto and active trading
Your broker now reports what you sold. Proving what you paid for it is still your job.
Digital assets and equities on one return, prepared by a licensed U.S. CPA who reconciles the basis rather than accepting whatever the exchange exported.
The gap Form 1099-DA leaves open
Brokers began reporting digital asset sales for the 2025 tax year. What they report is not what a return needs.
For sales effected in 2025, the instructions to Form 1099-DA are explicit that brokers are not required to report basis information. From 2026 the requirement arrives, but only for covered securities, and a digital asset acquired before January 1, 2026 is a noncovered security. So for most holdings of any age, the IRS now receives a proceeds figure with no cost against it.
The practical effect is a matching problem. A form arrives showing what you sold, the return has to show what you paid, and the difference between a reconstructed basis and a defensible one is the whole of the tax. Reconstructing it after the fact, from exports that disagree with each other, is the expensive way to do this.
We reconcile the ledger first and prepare the return from it, so the figures on the return can be explained to whoever asks.
What we cover
Digital assets and equities on the same return, rather than two preparers who each assume the other handled it.
Return preparation
Federal and state returns covering trading income, capital gains, staking and mining income, and the entity returns where the trading sits inside one.
Cost basis
Reconciled across exchanges, brokerages and self-custody wallets, on the wallet-by-wallet method the regulations now require rather than a universal pool.
Trader status
Whether your activity meets the standard for a trade or business, what the section 475(f) election would change, and whether it is worth making.
Staking and DeFi
Rewards, liquidity positions, lending and airdrops, valued and reported for the year dominion and control arose rather than the year you sold.
Amended returns
Prior years corrected where basis was wrong, income was missed, or an election was never filed. Several years at once where that is what it takes.
IRS notices
Correspondence, examinations and collections handled directly with the IRS and state authorities, including the matching notices these forms generate.
When to talk to us
Before the year closes. Loss harvesting, lot selection and the decision to realize or hold are levers that exist until December 31 and not afterwards.
Before the mark-to-market election deadline. The section 475(f) election is due by the unextended due date of the prior year’s return, so a trader who decides in March is already a year late for the current year.
Before a year is reconstructed from exports. Exchange records thin out, accounts close, and a transfer that had a basis when it happened becomes an unexplained deposit two years later.
When a notice arrives. A proceeds figure reported with no basis against it produces a proposed assessment on the full sale price, and the answer is a reconciliation, not a phone call.
Frequently asked questions
What does Form 1099-DA report, and what does it leave to me?
For sales effected in 2025 it reports gross proceeds, and the instructions state that brokers are not required to report basis information for those sales. From 2026 brokers must report basis, but only for covered securities, and a digital asset acquired before January 1, 2026 is a noncovered security. Everything the form does not carry (what you paid, when you acquired it, and which lot you sold) still has to come from your own records.
Does the wash sale rule apply to cryptocurrency?
Section 1091 disallows a loss on a sale of “shares of stock or securities” where substantially identical stock or securities are reacquired within thirty days either side. The IRS treats digital assets as property rather than currency, and Congress has not extended section 1091 to them, so a repurchased token is not presently caught by the rule that catches a repurchased stock position. Equities in the same portfolio are caught, which is why a mixed account needs both treatments applied correctly on one return.
Do I have to track cost basis separately for each wallet and exchange?
Yes. Basis is determined on an account-by-account basis under section 1012(c)(1), which ended the universal pooling approach many traders had been using. Rev. Proc. 2024-28 provides a safe harbor for allocating unused basis to the units held in each wallet or account as of January 1, 2025. If that allocation was never made, it is one of the first things we look at, because every later disposition depends on it.
Are staking and DeFi rewards taxable before I sell?
Yes. Rev. Rul. 2023-14 holds that a cash-method taxpayer who stakes cryptocurrency and receives validation rewards includes the fair market value of those rewards in gross income in the year the taxpayer gains dominion and control over them, valued as of that date and time. The tax is due on receipt, not on sale, and the amount included becomes the basis of the units received.
Do I need trader tax status to work with you?
No. Most of the returns we prepare in this area are for investors, and the answer to whether trader status applies is often no. The IRS conditions are that you seek to profit from daily market movements rather than from dividends, interest or appreciation, that the activity is substantial, and that it is carried on with continuity and regularity. Where the facts do not support it we say so, which is a cheaper answer than an examination.
What does the section 475(f) election do, and when is it due?
It elects mark-to-market accounting for a trader in securities. Positions are marked to market at year end, gains and losses become ordinary rather than capital, and the capital loss limitation and the wash sale rules stop applying. The timing is the trap: the election is due by the due date of the return for the year before the year it takes effect, not including extensions, attached to that return or to the extension request. It also has consequences on exit that are worth modeling before it is made.
Can you fix returns I have already filed?
Often, yes. Amended returns are a regular part of this work: a basis that was never reconstructed, staking income reported in the wrong year, an entity return that treated trading income as something else. We look at the open years together and tell you which ones are worth amending and which are not.
The reconciliation is the work
A short call about your accounts, how the records are kept and what the open years look like, and whether it is a mutual fit.