APPLE NEWS+ Form 1099-DA Arrives With a Gaping Hole. One Platform Saw This Coming.

Tax season 2026 has brought millions of crypto investors face-to-face with a new IRS form. And a serious problem is baked into its design.
​
Form 1099-DA, the first federal tax document created specifically for digital assets, began arriving in inboxes this month. The form reports gross proceeds from crypto sales directly to both taxpayers and the IRS. What it doesn’t report, at least for this first year, is cost basis, the original purchase price that determines how much tax is actually owed.

The gap has created confusion and, in many cases, the risk of dramatically overstated tax bills. An investor who bought crypto for $40,000 and sold it for $70,000 owes taxes on $30,000 in gains. But if that investor—or their software—reports only the $70,000 proceeds figure without accounting for basis, the math looks very different to the IRS.

​Janna Scott saw this coming. The founder of DeFi Tax spent two years studying exactly this kind of structural breakdown before launching her platform this month.

Back in December 2021, Scott’s accounting clients started asking whether their crypto tax reports were accurate. She decided to test the question directly. She took one wallet and ran it through fourteen major tax platforms. The results came back fourteen different ways, with discrepancies sometimes reaching tens of thousands of dollars on identical data.

“I kept seeing the same pattern,” Scott said. “People thought their taxes were handled until an audit or notice showed up. When I audited crypto tax platforms themselves, I realized many of them couldn’t explain their own numbers.”

Why the Form Falls Short
The 1099-DA’s missing cost basis isn’t an accident. The IRS built in a phase-in period because crypto brokers often lack visibility into basis data—especially when assets have moved between exchanges, sat in self-custody wallets, or were purchased on platforms that have since shut down. Full basis reporting won’t kick in until the 2026 tax year, with those forms arriving in 2027.

Until then, taxpayers are on their own.
Scott’s two-year research initiative, conducted alongside the SEC, IRS, and university researchers, revealed why that’s a problem. Most crypto tax software was never built to handle the complexity that now defines the market.

“Most tools were designed for basic buy-and-sell activity,” Scott said. “Once you introduce DeFi, LPs, bridges, and wrapping, the math breaks. The biggest issue isn’t missing features; it’s the lack of explainability. If you can’t explain how a number was calculated, it won’t hold up under audit.”

Decentralized Finance, Centralized Confusion
For anyone who has participated in DeFi, the 1099-DA’s limitations cut deeper. Liquidity pools, token bridges, and wrapped assets do not fit the transaction categories most software recognizes.

“Bridging isn’t selling, and wrapping isn’t disposal, but most software treats them that way,” Scott said. “DeFi activity exposes the cracks in legacy tax logic.”

Traditional platforms let users patch over these gaps by editing data manually, changing timestamps, reclassifying transactions, and adjusting basis. Those edits might quiet an error message, but they also destroy the records that matter when regulators start asking questions.

“Automation without transparency is just a faster risk,” Scott said.

Reading Directly From the Chain
DeFi Tax, now live, abandons the CSV upload model entirely. The platform reads transaction data straight from the blockchain. No imports. No manual edits. No user-adjustable fields. One wallet, one result, every time.

“We don’t optimize for speed or simplicity at the expense of accuracy,” Scott said. “DeFi Tax is built around audit defense. Every figure needs to be traceable, consistent, and defensible. That mindset changes everything about how the system is designed.”

Scott draws a sharp line between producing a tax number and producing documentation that survives examination.
“An auditor doesn’t just want totals,” she said. “They want to know how you got there. Audit-ready reporting is structured, consistent, and explainable.”

The Matching Has Begun
The IRS now receives a copy of every 1099-DA. Automated systems will compare those forms against filed returns. Discrepancies—from missing basis, miscategorized trades, or software inconsistencies—will trigger notices.

“As reporting requirements tighten, crypto audits are becoming more common,” Scott said. “The risk isn’t just enforcement; it’s being unprepared when questions come.”

DeFi Tax serves investors, DeFi participants, startup founders, DAOs, and the CPAs and tax attorneys who advise them. Scott rejects the idea that crypto holders are looking for loopholes.

“Most people aren’t trying to avoid crypto taxes,” she said. “They’re trying to understand them.”

Her advice for anyone staring down an April deadline:
“Don’t wait until tax season or an audit to understand your exposure. If you can’t explain your report today, that’s a signal to fix it.”

“Clarity is the most undervalued feature in crypto finance,” Scott said. “The future of crypto taxes is explainability.”