How Do You Actually Reconcile Your 1099-DA With Crypto Tax Software?

You've received a pile of 1099-DAs from your crypto exchanges, created reports from your crypto tax software and now you have to create a reconciled Form 8949 to report your gains and losses. Now comes the fun part: finding out if the two sources of information actually match—and dealing with the inevitable discrepancies. Welcome to the new tedious crypto tax season for U.S. taxpayers.

TL;DR:

• The new Form 8949 has six crypto-specific checkboxes (G/H/I for short-term, J/K/L for long-term) corresponding to covered, non-covered, and unreported digital asset transactions. 2025 IRS Form 8949 Draft Instructions
• Reconciliation requires comparing 1099-DA proceeds and cost basis against your crypto tax software calculations, then documenting all differences with adjustment codes.
• Most discrepancies arise from transfers between wallets/exchanges, missing cost basis on non-covered securities and incorrect cost basis on covered securities.
• Starting in 2026, you can potentially eliminate 1099-DA reporting entirely by only buying crypto on exchanges (then transferring out), conducting all trades on DEXs, and only selling stablecoins for USD on exchanges.

Related: IRS 1099-DA Crypto Tax Madness is Here: More Forms, More Problems, More Headaches

What does it mean to reconcile Form 1099-DAs?

Reconciling makes sure gains and losses are accurate, complete, and correctly categorized into different buckets with nothing left out or double counted. Otherwise, a taxpayers gains and losses will either be overstated or understated and both of those are a problem.

What does the new Form 8949 look like for crypto?

The IRS has completely revamped Form 8949 to accommodate the three categories of digital asset reporting. Now you need to segregate your transactions across six different checkboxes.

SHORT-TERM (held 1 year or less) - Page 1:

• Box G: Transactions reported on Form 1099-DA with basis reported to IRS (covered securities)
• Box H: Transactions reported on Form 1099-DA with basis NOT reported to IRS (non-covered securities)
• Box I: Digital asset transactions NOT reported on Form 1099-DA or 1099-B (unreported)

LONG-TERM (held more than 1 year) - Page 2:

• Box J: Transactions reported on Form 1099-DA with basis reported to IRS (covered securities)
• Box K: Transactions reported on Form 1099-DA with basis NOT reported to IRS (non-covered securities)
• Box L: Digital asset transactions NOT reported on Form 1099-DA or 1099-B (unreported)

Each checkbox category requires a separate Form 8949. If you have transactions in all six categories, you're filing six different forms (or 6 different sections; short- and long-term sections are technically part of one form).

Key Takeaway

In years prior to January 1, 2025, taxpayers only reported short and long gains and losses. Now the possible reporting has tripled from 2 to 6 different presentations. This alone supports my triple the work and triple the headache theory triggered by 1099-DA reporting.

What is the 1099-DA reconciliation process step-by-step?

Step 1: Gather all your 1099-DA forms

You'll receive 1099-DA forms from every centralized exchange where you sold crypto. Coinbase, Kraken, Gemini—each sends their own form.

Step 2: Generate reports from your crypto tax software

Your crypto tax software should have calculated all your gains and losses on a wallet-by-wallet and exchange-by-exchange basis. Digital assets in each wallet or exchange account has its own separate accounting.

Step 3: Create a reconciliation table

Create a spreadsheet file and compare what brokers reported against what your software calculated.

Step 4: Identify which Form 8949 box to use

The checkboxes on your 1099-DA determine which Form 8949 box you use:

• Box 2 checked on 1099-DA (basis reported to IRS) = Use Form 8949 Box G or J
• Box 2 unchecked on 1099-DA (basis NOT reported) = Use Form 8949 Box H or K
• Box 9 checked on 1099-DA = Confirms non-covered security status
• No 1099-DA at all = Use Form 8949 Box I or L

How do you reconcile common 1099-DA scenarios?

Let's walk through the three most common reconciliation scenarios with detailed examples showing exactly how information flows from Form 1099-DA to Form 8949 by referencing your crypto tax software.

Example 1: Missing cost basis (non-covered security)

This is the most common scenario. Your broker reports the sale proceeds but lists cost basis as "unknown" because the crypto was purchased before 2025 or transferred into the account from another wallet or exchange account.

The Situation: You bought 0.5 BTC on Coinbase in January 2024 for $28,000 (cost basis of $56,000 per BTC). You sold it on the same exchange in November 2025 for $32,500.

Form 1099-DA shows:

Your crypto tax software shows:

How to report on Form 8949:

Form to use: Part I, Box H checked (short-term, basis NOT reported to IRS)

Key Takeaway

When Box 1g shows "UNKNOWN" and Box 2 is unchecked on your 1099-DA, you must provide the cost basis from your own records in Column (e) of Form 8949. The IRS has the proceeds reported by your broker—if you don't report basis, they'll assume it's zero and tax you on the entire $32,500.

Example 2: Incorrect cost basis (covered security - cost basis method mismatch)

This scenario occurs when your crypto exchange reports both proceeds AND cost basis to the IRS, but the cost basis is wrong. This will most likely happen because your exchange is using a different cost basis method than your crypto tax software settings (e.g., FIFO, HCFO, Specific Identification.) The exchanges can make other mistakes as well.

The Situation: You bought ETH on Kraken at two different times:

• 1 ETH on March 10, 2023 for $2,000 (lower cost basis)
• 1 ETH on June 15, 2023 for $2,800 (higher cost basis)

In July 2026, you sell 1 ETH for $5,800. Kraken uses FIFO (First In, First Out) by default and reports selling your March 2023 ETH with $2,000 basis. However, you elected to use HIFO (Highest In, First Out) to minimize your tax liability, meaning you're actually selling your June 2023 ETH with $2,800 basis.

Form 1099-DA shows:

Your crypto tax software shows:

How to report on Form 8949:

Form to Use: Part II, Box J checked (long-term, basis WAS reported to IRS—even though it's the wrong amount due to method mismatch)

Key Takeaway

When your broker reports cost basis using a different method than you elected (FIFO vs. HIFO, for example), you MUST enter the broker's incorrect amount in Column (e), then use Code "B" in Column (f) with the appropriate adjustment in Column (g). In this case, since your actual basis ($2,800) is HIGHER than what Kraken reported ($2,000), you enter a NEGATIVE adjustment of ($800) to reduce your taxable gain.

Also do an analysis on whether the exchanges will aggregate 1099-DA into a summary format on a per asset basis; otherwise, you’ll have to sum and sort multiple individual 1099-DAs for BTC, for example, to compare with total gains/losses per asset per exchange account, as produced by the crypto tax software.

Example 3: Unreported transaction (No 1099-DA)

This is perhaps the most straightforward scenario. You made a crypto transaction that doesn't involve a centralized exchange, so no 1099-DA was issued. You're entirely responsible for self-reporting.

The Situation: In September 2025, you swapped 100 UNI tokens for 0.08 ETH on Uniswap (a decentralized exchange). Your UNI tokens were worth $800 at the time of the swap. You originally bought the UNI for $600 in August 2025.

Form 1099-DA shows:

NO FORM 1099-DA ISSUED - Uniswap is a decentralized exchange (DEX), not a digital asset broker. No reporting to IRS.

Your crypto tax software shows:

How to report on Form 8949:

Form to use: Part I, Box I checked (short-term digital asset, NOT reported on 1099-DA or 1099-B)

Key Takeaway

The crypto gain and loss self-reporting is exactly the same as it was prior to January 1, 2025. The only difference is the IRS tripled your tax prep cost and headaches by requiring crypto exchanges to report transactions, leaving you to sort out the mess. Use Box I or L for all self-custody and decentralized finance activity.

Summary of major 1099-DA reconciliation issues

The three primary reconciliation scenarios detailed above represent the three buckets of reconciliation work most taxpayers will encounter:

1. Missing cost basis for non-covered securities (Example 1)
2. Incorrect cost basis due to method mismatches (Example 2)
3. Completely unreported DeFi transactions (Example 3)

What are the most common 1099-DA discrepancies?

Aside from the three most common reconciliation issues outlined above, here are some additional things to think about:

Cost basis method mismatch

Your exchange uses FIFO (First In, First Out) by default, but you've elected to use HIFO (Highest In, First Out) or Specific Identification in your tax software. The exchange reports cost basis using their method on the 1099-DA (Box 2 checked), but it doesn't match your elected method. You must enter the exchange's reported basis in Column (e), then use Code "B" with an adjustment in Column (g) to reflect the correct cost basis.

Key Takeaway

The IRS matches proceeds and cost basis reported on 1099-DAs with the amounts you report on Form 8949 and differences could generate a notice regardless of correct adjustment codes. You want to avoid triggering notices because it could take months to resolve with an understaffed IRS.

Unexplained exchange cost basis errors

Sometimes exchanges report cost basis amounts that have no logical explanation from your point of view. These errors often stem from exchange system glitches, data migration issues, or incorrect assumptions about transferred assets. Document the error, use Code "B" to correct it on Form 8949, and keep detailed records proving your actual cost basis.

Staking rewards basis tracking problem

When you earn staking rewards, exchanges should report them as ordinary income on Form 1099-MISC (if you earned $600 or more). Your taxable income is the fair market value at the time you received the rewards—let's say $2,650. That $2,650 becomes your cost basis for those tokens. The exchange may not properly track which tokens came from staking versus which tokens you purchased because only purchases on the exchange after December 31, 2025, are technically tracked for cost basis and 1099-DA reporting purposes.

The exchange tracks rewards for 1099-MISC purposes, but when you SELL those specific tokens, they may report "unknown" basis on the 1099-DA or even $0 basis. Make sure you add the staking rewards from exchanges into your crypto tax software so it correctly calculates the income and the cost basis.

Incorrect proceeds reported by exchange (Form 8949 design gap)

This is a tax reporting conundrum because Form 8949 lacks a specific adjustment code for incorrect proceeds. The IRS instructions explicitly state you must "always report the proceeds (sales price) shown on the form" in Column (d), but what happens when those proceeds are significantly different? There's no clean mechanism to adjust incorrect proceeds like there is to correct basis with Code "B”, for example.

Key Takeaway

If you simply change the proceeds in Column (d) to the correct amount, your return won't match the 1099-DA the IRS received and automatic matching notices will get triggered. This is a design flaw in Form 8949 that will likely surface during the early years of 1099-DA reporting when exchanges are scrambling to create accurate reporting systems.

What to do when proceeds are incorrect

• Request a corrected 1099-DA from the exchange – This is the best solution but the exchange may disagree and never send a correction and/or you may not get a corrected notice before the filing deadline.
• Use Code "O" (Other) with adjustment – Enter the incorrect 1099-DA proceeds in Column (d), use Code "O" in Column (f), and enter a negative adjustment in Column (g) to correct the difference. Note: this code isn't explicitly designed for this purpose and may raise IRS questions
• Attach a detailed statement – Report the incorrect proceeds as shown on the 1099-DA and attach a statement explaining the discrepancy with supporting documentation.

The good news is, practically speaking, reported proceeds are far more likely to be correct than issues with cost basis. Most exchanges can be linked to crypto tax software via APIs for importing transaction data automatically. The source of your proceeds information comes from the exchange therefore, reported amounts should match your crypto tax software.

What 1099-DA documentation should you keep?

Maintain meticulous records regardless of strategy:

• Archive all 1099-DAs received by year.
• Generate gains and loss reports from crypto tax software.
• Create a spreadsheet reconciliation tracker for 1099-DA differences.
• Create notes explaining any Form 8949 adjustments (especially Code B corrections).
• Document your entire process with an audit-proof mindset.

Frequently asked questions about 1099-DA reconciliation

What do I do if my 1099-DA shows a cost basis that's wrong?

Enter the incorrect cost basis from the 1099-DA in column (e) of Form 8949, then use adjustment code "B" in column (f) and enter the correction amount in column (g) so the correct total is shown in column (h). This ensures your return matches what the IRS received from your exchange while claiming your actual correct cost basis. Use Box G (short-term) or Box J (long-term) on Form 8949.

What do I do if my 1099-DA shows no cost basis reported?

Enter the correct cost basis from the 1099-DA in column (e) of Form 8949, then use adjustment code "B" in column (f) and enter zero in column (g). This ensures your return matches what the IRS received from your exchange while reporting the missing cost basis correctly. Use Box H (short-term) or Box K (long-term) on Form 8949.

Do I need to report crypto transactions if they don't appear on a 1099-DA?

Yes, absolutely. All crypto dispositions are taxable events that must be reported regardless of whether you receive a 1099-DA. DeFi swaps, NFT sales, peer-to-peer trades, and staking rewards all require reporting in the absence of a 1099-DA. Use Box I (short-term) or Box L (long-term) on Form 8949 for these unreported transactions.

Can I really avoid 1099-DA reporting by only selling stablecoins?

Partially. Stablecoin sales under $10,000 in total per exchange don't require exchange reporting. Above that threshold, exchanges will report total stablecoins sales on one 1099-DA. What happens if I don't reconcile my 1099-DA with my tax return? The IRS matches your 1099-DAs reported by exchanges with your self-reported Form 8949. If the proceeds or adjustments on your tax return don't match what exchanges reported, you'll likely receive a CP2000 notice (proposed tax adjustment). If you report your 1099-DA info as is on Form 8949 without adjustments (assuming cost basis is not correct) then you may overpay or underpay your correct tax liability both of which are a problem.

How do crypto tax software programs handle 1099-DA reconciliation?

Reconciliation features will depend on your crypto tax software. It may be time to consider a new provider based on the features of your existing crypto tax software to help the reconciling process. However, you're ultimately responsible for reviewing, documenting and reporting any differences.

WEIGH IN 💬

Reconciling 1099-DAs with crypto tax software is where a lot of otherwise sharp investors quietly get tripped up. Have you already run into mismatches, missing basis, or Form 8949 headaches when you tried to line everything up? What’s the gnarliest 1099-DA or crypto tax reconciliation mess you’ve seen (or survived)? Drop your war stories, questions, or “never again” lessons in the comments so other HODLers can learn from your experience instead of getting rekt themselves.

As always, your goal is to get a Crypto Bullseye™.

Yours in crypto,

Kirk David Phillips, CPA, CMA, CFE, CBP