Introduction: Why Form 1099-DA Changes Everything
Form 1099-DA is the information return that ended the era of unmatched crypto reporting, and the first ones landed in American letterboxes in February 2026. Furthermore, copies went straight to the IRS. Consequently, the Service now holds a machine-readable record of what you sold, when you sold it, and what you received.
For wealthy Americans in Britain, that shift matters more than it does at home. You may hold digital assets across a US exchange, a UK platform and a self-custody wallet. However, only some of that activity generates a form. Therefore, the gaps in Form 1099-DA are as important as its contents.
What Form 1099-DA Actually Reports
Form 1099-DA reports proceeds, and sometimes basis, from digital asset dispositions that a broker facilitates. Specifically, it captures sales for cash, exchanges of one digital asset for another, payments for goods or services, and transaction costs settled in crypto. The IRS sets out the scope in its guidance on understanding your Form 1099-DA, and the form itself shows the boxes your broker completes.
Why 2026 Is the Year It Bites
Two things converged this year. Firstly, brokers furnished the first forms by 17 February 2026, covering 2025 disposals. Secondly, basis reporting began for assets acquired from 1 January 2026. Meanwhile, Britain started collecting parallel data under a new international framework. Accordingly, 2026 is the year the reporting net actually closed.
At TaxYork we prepare cross-border returns for founders, investors and executives holding substantial digital assets. Notably, the clients facing enquiries are rarely those who hid anything. Instead, they are the ones whose reported gain does not match a gross proceeds figure the IRS already holds.
How Form 1099-DA Works in Practice
The reporting regime flows from the Infrastructure Investment and Jobs Act, which extended the broker rules in IRC § 6045 to digital assets. Treasury then finalised the mechanics, and the IRS collected the guidance in its summary of the final broker reporting regulations.
Gross Proceeds From 2025 Onwards
Custodial brokers report gross proceeds for transactions effected on or after 1 January 2025. Importantly, gross proceeds means the whole disposal amount, not your profit. Therefore, a $840,000 figure on the form does not imply an $840,000 gain.
The Basis Boxes Were Blank for 2025
Here is the detail that catches people out. For 2025 disposals, brokers were not required to report cost basis. Consequently, most forms arriving in February 2026 showed proceeds with no acquisition cost beside them. You had to calculate basis yourself before filing, and the IRS says so explicitly.
Covered and Noncovered Assets From 2026
Basis reporting starts with digital assets acquired in the same broker account on or after 1 January 2026. Those are "covered" assets. By contrast, anything bought earlier, or transferred in from another wallet, remains noncovered. Accordingly, your broker will keep reporting proceeds without basis for older holdings for years to come.
The Matching Risk Form 1099-DA Creates
Information returns matter because computers compare them. Furthermore, the comparison happens whether or not your figures are right.
Gross Proceeds Against Your Reported Gain
The IRS matches the proceeds on Form 1099-DA against what appears on your return. If you report only a net gain, the totals will not reconcile. Consequently, the system flags an underreporting discrepancy even when your tax is entirely correct.
Reporting the Transactions Properly
The fix is mechanical rather than clever. You report each disposal on Form 8949 and carry the totals to Schedule D, showing proceeds and basis separately. Therefore, the gross figure appears on your return exactly as the broker reported it. Additionally, you must answer the digital asset question on page one of Form 1040 truthfully.
What a Mismatch Actually Triggers
A mismatch generates an automated notice proposing additional tax on the full proceeds, because the system assumes zero basis. Nevertheless, that proposal is rebuttable with records. Importantly, responding within the deadline avoids assessment, so never ignore the letter.
The Gap: Foreign Exchanges Do Not Issue Form 1099-DA
This is the point most published guidance skates over, and it matters enormously if you live in Britain.
The Rules Bind US Brokers
The Form 1099-DA regime generally reaches US brokers. A UK or European exchange with no US business is not filing American information returns for you. Consequently, disposals on those platforms produce no form at all.
Your Obligation Does Not Shrink
Receiving nothing changes your paperwork, not your liability. US citizens report worldwide income regardless of where the platform sits. Therefore, unreported gains on a London exchange are simply undocumented, not untaxed. Ultimately, that asymmetry creates the illusion of safety.
Britain Closes the Gap From 2026
The illusion has now expired. Under the OECD Cryptoasset Reporting Framework, UK service providers began collecting user data on 1 January 2026. Their first report to HMRC falls due by 31 May 2027, covering the 2026 calendar year. Additionally, providers face penalties of up to £300 per user for inaccurate or unverified reports, as the UK CARF guidance confirms. The parallel EU regime, DAC8, follows the same timetable, and HMRC's cryptoassets manual sets out the UK tax treatment.
The Two Tax Years Never Line Up
One practical wrinkle deserves attention before you file. Britain taxes gains by reference to a year ending on 5 April, whereas the United States uses the calendar year. Consequently, a disposal in February sits in different tax years on each side of the Atlantic. That mismatch delays the foreign tax credit, because the UK liability may not crystallise until the following January. Therefore, we often recommend the accrual basis for credit purposes so the two systems align.
What Form 1099-DA Does Not Cover
Knowing the limits prevents two opposite mistakes: assuming everything is reported, and assuming nothing is.
The DeFi Broker Rule Was Repealed
Treasury finalised regulations in December 2024 treating decentralised finance front-end providers as brokers. However, Congress overturned them under the Congressional Review Act. House Joint Resolution 25 became law on 10 April 2025. Consequently, Treasury reverted the regulatory text, as the Federal Register notice records. Critically, a rule overturned this way cannot be reissued in substantially similar form without fresh legislation.
Self-Custody and Internal Transfers
Moving assets between your own wallets is not a disposal and generates no form. Similarly, non-custodial wallets fall outside the regime entirely. Nevertheless, those transfers destroy the broker's basis history, which is precisely why noncovered reporting persists.
Backup Withholding Is Deferred to 2027
Brokers would ordinarily apply 24 per cent backup withholding where a taxpayer identification number is missing. However, the IRS deferred that obligation for 2025 and 2026 under Notice 2025-33. Therefore, withholding begins with 2027 transactions, and for crypto-for-crypto trades it is limited to 24 per cent of the liquidation proceeds.
The Basis Problem Behind Every Form 1099-DA
Proceeds are easy. Basis is where wealthy holders lose money, and a rule change in 2025 made it harder.
Universal Basis Tracking Ended
Until 2025, many holders tracked basis as though all their wallets formed one pool. That universal method is gone. From 1 January 2025, basis must be tracked account by account and wallet by wallet.
The Safe Harbour Most People Missed
Revenue Procedure 2024-28 offered a one-time, irrevocable allocation of unused basis across wallets, and it had to be in place by 1 January 2025. Consequently, holders who never made the allocation now face a reconstruction exercise instead. Furthermore, absent specific identification at the time of sale, the broker applies first-in, first-out.
Reconstructing Historic Cost
Reconstruction is achievable, though rarely quick. We rebuild acquisition records from exchange exports, bank statements and blockchain data, then convert each acquisition to US dollars at the historic rate. Accordingly, clients who bought during 2017 and 2021 often recover substantial basis that would otherwise default to zero.
Form 1099-DA, FBAR and FATCA: Correcting a Common Error
Now the correction that matters most, because several widely read guides state the opposite.
Crypto Alone Is Not Yet FBAR Reportable
FinCEN Notice 2020-2 says the FBAR regulations do not currently treat a foreign account holding virtual currency as a reportable account. Consequently, an account holding *only* crypto is not FBAR reportable today. FinCEN has signalled its intention to change that, yet no final rule has arrived. Therefore, guidance telling you to file an FBAR purely for a foreign exchange balance overstates the position, and several widely read expat guides do exactly that.
Hybrid Accounts Are Different
The exception swallows a great deal in practice. Where the same foreign account also holds fiat currency or securities, the account is reportable once your aggregate foreign balances exceed $10,000. Consequently, most real-world exchange accounts with a sterling cash balance do fall within FBAR reporting after all.
Form 8938 Runs on Its Own Rules
FATCA reporting on Form 8938 is separate and broader. Digital assets held through a foreign financial institution can constitute a specified foreign financial asset. Meanwhile, thresholds for Americans living abroad start at $200,000 at year end. Accordingly, you can owe a Form 8938 without owing an FBAR.
Case Study: A London Investor Facing Two Regimes
Consider a client we will call a London-based technology founder, a US citizen and UK resident. During 2025 they disposed of digital assets through a US exchange and a European platform. In February 2026 a single Form 1099-DA arrived showing $840,000 of gross proceeds and no basis.
Establishing the Real Position
Their acquisitions ran from 2017 to 2021 across four wallets, and no Revenue Procedure 2024-28 allocation had been made. We reconstructed basis of $310,000 from exchange exports and chain data. Therefore, the actual long-term gain was $530,000 rather than the $840,000 the form appeared to show.
The Two Tax Bills
US tax came to $106,000 at the 20 per cent long-term rate, plus $20,140 of net investment income tax. On the UK side, the sterling gain of roughly £417,300 attracted capital gains tax at 24 per cent after the £3,000 annual exempt amount, producing about £99,400.
Because the client was UK resident, the gain was foreign source, so foreign tax credits absorbed the entire $106,000 of regular US tax and left an excess to carry forward. However, no credit touches the net investment income tax. Consequently, $20,140 remained payable to the United States on top of the UK charge.
What the Exercise Saved
Had the client reported nothing and relied on the automated notice, the IRS would have proposed tax on the full $840,000 at zero basis. That exposure exceeded $200,000 before penalties and interest. Ultimately, reconstruction and correct Form 8949 presentation cost a fraction of that, and it closed the year cleanly.
How TaxYork Can Help
We reconcile Form 1099-DA against your actual records before anything reaches a return. Specifically, we rebuild basis, convert acquisitions at historic rates, and present each disposal so the gross proceeds match what the IRS already holds. Furthermore, we compute the UK capital gains position alongside it rather than afterwards.
Our team then handles the interaction between the two systems. We prepare the US tax returns and apply treaty relief so credits land correctly across mismatched tax years. Where earlier years were never reported, we assess whether IRS Streamlined Filing is the appropriate route. Guidance from bodies such as ICAEW and the IRS digital assets hub informs our approach.
Conclusion
Form 1099-DA has made crypto disposals visible, matchable and permanent in the IRS record. Gross proceeds have been reported since 2025, basis reporting began for 2026 acquisitions, and the first forms arrived in February 2026. Meanwhile, the foreign gap that once protected UK-based holders closes as CARF data reaches HMRC from 2027.
Above all, treat the form as an opening position rather than a conclusion. It shows what you sold, not what you owe. Therefore, reconstruct your basis, report every disposal properly, and check the FBAR and FATCA positions separately before you file.
Contact Us
Speak to specialists who reconcile these forms every filing season. You can book a consultation with our cross-border team, or email hello@taxyork.com. Alternatively, call 020 3488 8606 to discuss your position. We will review your Form 1099-DA, rebuild your basis, and quantify both the US and UK charges before anything is submitted.
Disclaimer
This article provides general information about Form 1099-DA and the taxation of digital assets for US citizens resident in the United Kingdom. It does not constitute tax or legal advice for any individual or entity. Digital asset rules are changing rapidly, and the correct treatment depends entirely on your circumstances. Accordingly, you should obtain professional advice before acting on anything set out above. TaxYork accepts no liability for action taken solely on the basis of this article.