The 5 Crypto Tax Events Your 1099-DA Won't Report (But the IRS Still Expects You To)

Key Takeaways

Your Form 1099-DA covers only broker-effected transactions on custodial platforms. DeFi activity, staking rewards, airdrops, liquidity pool transactions, and cross-chain bridges are generally not reported, but they are fully taxable under current IRS guidance.
The DeFi broker reporting rule was repealed (H.J.Res.25, signed April 10, 2025). No 1099-DA for pure on-chain DeFi means you must self-report every taxable DeFi event.
Staking rewards are ordinary income at receipt under Rev. Rul. 2023-14, regardless of whether you receive a 1099-MISC, 1099-INT, or no form at all.
Liquidity pool deposits, withdrawals, and fee accruals each create potential tax events with limited IRS guidance. Document your position and be consistent.
Use Form 8949 Box I (short-term) or Box L (long-term) for digital asset transactions not reported on any information return.

Your Form 1099-DA covers only a fraction of what the IRS expects you to report. It captures broker-effected transactions on custodial platforms: your Coinbase trades, your Kraken sells, your Gemini swaps. What it does not capture is the entire universe of DeFi, staking, airdrops, and on-chain activity that sits outside the broker reporting system but is fully taxable under current IRS guidance.

The DeFi broker reporting rule (T.D. 10021) was repealed by Congress via the Congressional Review Act (H.J.Res.25, signed April 10, 2025). That repeal means no 1099-DA for pure on-chain DeFi activity. It does not mean the income goes unreported. It means you are responsible for reporting it yourself. IRS Notice 2024-57 carved out certain staking-related transaction structures from 1099-DA reporting for TY2025. The carve-out is from the form, not from your tax obligation.

In my practice, I see clients who file based only on their 1099-DA and assume they are done. They are not. Here are the five most common taxable crypto events that will not appear on your 1099-DA but that the IRS still expects on your return.

1. Are Staking Rewards Taxable Even Without a 1099-DA?

Yes. Staking rewards are taxable as ordinary income in the year of receipt under Rev. Rul. 2023-14. Whether you staked ETH directly on the Beacon Chain, delegated SOL to a validator, or earned yield through an exchange earn program, the fair market value of the tokens at the moment they hit your wallet is ordinary income.

Why Staking Rewards Are Not on Your 1099-DA

Brokers are not required to report certain staking-related transaction structures on Form 1099-DA for TY2025 under IRS Notice 2024-57. Staking rewards themselves are not reported on 1099-DA regardless. The reward is income, not a disposition, so it does not fit the form's structure of reporting proceeds from sales.

Where to Find Your Staking Income

Some exchanges issue a 1099-MISC or 1099-INT for staking income. Others provide an annual summary or downloadable statement without issuing a formal tax form. If no form was issued, the income is still reportable. Check your exchange account for a year-end staking or rewards summary.

How to Report Staking Rewards

Staking rewards are reported as ordinary income, typically on Schedule 1 (Other Income) or Schedule C if you are operating as a trade or business. The fair market value at receipt becomes your cost basis in the tokens. When you later sell or swap those tokens, you report a capital gain or loss on Form 8949 based on the difference between your proceeds and that basis.

The Compounding Problem

If you received staking rewards and then sold them during 2025, you have both an income event (receipt of the reward) and a capital gains event (the sale). The income side will not be on your 1099-DA. The sale side might be, if it occurred on a reporting broker platform. Filing only the sale without the income creates an underreporting risk on the ordinary income side. Filing the sale without proper basis (the fair market value at receipt) creates a phantom gain on the capital gains side.

A Note on the Jarrett Case

While some taxpayers have taken the position that staking rewards should be taxed only upon sale (based on the theory raised in Jarrett v. United States), the IRS has not acquiesced to this position. Rev. Rul. 2023-14 remains the governing authority, and staking rewards should be reported as income at receipt unless and until the law changes. Discuss any alternative filing positions with your CPA.

2. How Are DeFi Swaps, Lending, and Yield Farming Taxed?

Any time you swap one token for another on a decentralized exchange (Uniswap, SushiSwap, Curve, Jupiter, Raydium, or any protocol), you have a taxable disposition. The IRS treats crypto-to-crypto swaps as a sale of the outgoing token followed by a purchase of the incoming token. Each swap is a separate realization event that must be reported.

Why DeFi Activity Is Not on Your 1099-DA

The DeFi broker reporting rule was repealed by Congress via the Congressional Review Act. Pure on-chain DeFi activity without a reporting broker intermediary generally will not appear on 1099-DAs. Activity routed through a reporting broker intermediary could appear, but for most users interacting directly with smart contracts through a non-custodial wallet, there is no broker in the transaction chain.

How to Report DeFi Swaps

Each DeFi swap gets its own line on Form 8949. Use Box I (short-term) or Box L (long-term) for digital asset transactions not reported on any information return. Proceeds equal the fair market value of the token received at the time of the swap. Basis is what you originally paid for the token you gave up, determined by your cost basis method (FIFO or Specific ID), plus any gas fees paid for the transaction on the buy side.

For more on cost basis methods and how they work under the new per-wallet rules: Crypto Cost Basis in 2026: FIFO, Specific ID, and Why Your Wallet History Matters More Than Ever.

DeFi Lending

When you supply assets to a lending protocol like Aave or Compound, the mechanics vary by protocol. Some give you a receipt token (aToken, cToken) in exchange for your deposit. Whether that exchange constitutes a taxable event depends on how the IRS characterizes the transaction. Guidance is limited and fact-specific. Interest earned is almost certainly ordinary income when received or accrued. Discuss the specific protocol mechanics with your CPA.

Yield Farming and Liquidity Mining Rewards

Reward tokens received for providing liquidity or participating in farming programs are ordinary income at fair market value when received. This follows the same logic as staking: you received something of value for an activity. The receipt is the taxable event.

Gas Fees as Transaction Costs

Gas fees paid to execute DeFi transactions are transaction costs. For a swap, gas paid on the sell side can be treated as a cost that reduces proceeds (a Code E adjustment on Form 8949), and gas paid on the buy side adds to basis. Document gas fees from your on-chain records.

3. How Are Liquidity Pool (LP) Transactions Taxed?

Providing liquidity to a decentralized exchange creates multiple potential tax events that will not appear on any 1099-DA. The IRS has not issued definitive guidance on LP tax treatment, making this one of the most uncertain areas in crypto taxation. Here is the current landscape.

Is Depositing Into a Liquidity Pool Taxable?

When you deposit two tokens into a liquidity pool and receive LP tokens in return, the question is whether this constitutes a taxable exchange or a non-taxable deposit. There are reasonable arguments on both sides, but the conservative position is that depositing assets and receiving a different token (the LP token) constitutes a taxable disposition of the deposited assets. Document your position and be consistent year over year.

How Are LP Trading Fee Earnings Taxed?

As a liquidity provider, you earn a share of the trading fees generated by the pool. These are generally treated as ordinary income. The challenge is that in many AMM (automated market maker) protocols like Uniswap and Curve, fees are automatically reinvested into your LP position rather than distributed separately, making them difficult to track and value in real time.

What Is Impermanent Loss and How Is It Taxed?

Impermanent loss occurs when the price ratio of the two tokens in your pool changes relative to when you deposited. You end up with a different ratio of tokens than you deposited. The tax treatment of impermanent loss is not explicitly addressed in IRS guidance. The difference between what you deposited and what you withdrew is captured in your capital gain or loss calculation upon withdrawal, not as a separate deductible event.

How to Report LP Activity

Each event (deposit, fee accrual, withdrawal) needs to be tracked and reported individually based on how you characterize the transactions. Use Box I or Box L on Form 8949 for capital gains portions. Use Schedule 1 or Schedule C for ordinary income portions (fee earnings). Maintain consistent treatment and document your rationale for each characterization.

4. Are Cross-Chain Bridge and Token Wrapping Transactions Taxable?

Moving assets across blockchains or wrapping tokens creates taxable questions that your 1099-DA will not address and that the IRS has not definitively resolved.

Is Bridging Crypto a Taxable Event?

When you bridge a token from one blockchain to another (for example, bridging ETH from Ethereum to Arbitrum or from Ethereum to Solana), the tax treatment depends on the bridge mechanism. Some bridges lock your asset on the source chain and mint a synthetic version on the destination chain. Others use liquidity pools to swap native assets across chains.

The IRS has not issued specific guidance on bridge transactions. The conservative position is that if you receive a fundamentally different token (even a wrapped or bridged version of the same asset), it could be treated as a taxable exchange. The counterargument is that the economic substance is unchanged. This is an area of genuine uncertainty.

Is Wrapping BTC Into wBTC Taxable?

Wrapping BTC into wBTC or ETH into WETH involves depositing one asset and receiving a different token that represents it on another chain or protocol. Whether this constitutes a taxable event is unsettled.

The argument that wrapping is a non-taxable "like-kind" exchange under IRC Section 1031 does not apply. The Tax Cuts and Jobs Act of 2017 limited Section 1031 to real property. Some practitioners treat wrapping as a non-event under the theory that the economic substance is identical, but this position has not been tested in court or confirmed by the IRS.

Why Bridge Transactions Matter for Your Basis

If the bridging or wrapping event was taxable, your basis in the new token resets to fair market value at the time of the bridge. If it was non-taxable, your original basis carries through. The difference can be significant in a volatile market. Document your position, keep records of every bridge transaction with timestamps and values, and apply your chosen treatment consistently.

How to Report Bridge and Wrapping Transactions

If treating as taxable, report on Form 8949 Box I or Box L. If treating as non-taxable, maintain your original basis records through the transaction and be prepared to explain your position if questioned.

5. How Are Crypto Airdrops and Hard Forks Taxed?

Airdrops are among the most commonly unreported crypto income events, partly because they happen passively. You did not ask for the tokens, they just appeared in your wallet.

Airdrop Tax Treatment

The IRS treats airdrops as ordinary income at the fair market value of the tokens when you gain dominion and control over them. For most airdrops, that means when the tokens appear in your wallet and you have the ability to sell, transfer, or use them. The income recognition event happens at receipt, not at sale. Rev. Rul. 2019-24 established this framework.

Hard Fork Tax Treatment

When a blockchain undergoes a hard fork and you receive new tokens on the forked chain, the IRS treats this similarly to an airdrop: ordinary income at fair market value when you gain dominion and control. The same Rev. Rul. 2019-24 applies.

What If the Airdropped Token Has No Value?

If you receive an airdrop of a token you cannot sell because no exchange lists it and there is no market for it, the fair market value may be $0 at receipt. You may have a reasonable position that no income was recognized at that time. This is fact-specific and depends on whether a market existed when you received the tokens. If the tokens had value and you could have sold them, you have income.

What About Spam Tokens and Dust Attacks?

Not every token that appears in your wallet is a real airdrop. Spam tokens and scam airdrops are common, particularly on EVM chains and Solana. You are not required to report income for tokens that have no genuine market value or that you did not exercise dominion and control over. If you interacted with a spam token (for example, attempted to swap it), you may have created a taxable event. The best practice is to ignore spam tokens entirely and not interact with them.

How to Report Airdrops and Hard Forks

Airdrop and hard fork income goes on Schedule 1 (Other Income) or Schedule C. The fair market value at receipt becomes your cost basis in the tokens. When you later sell, report the capital gain or loss on Form 8949 using Box I or Box L.

How to Track What the 1099-DA Misses

Each of these five event types requires different tracking methods:

For staking and earn rewards: Check your exchange for annual staking summaries. For on-chain staking, use a blockchain explorer or crypto tax tracking software to identify reward events and their fair market values at the time of each reward.

For DeFi activity: Your wallet's on-chain transaction history is the primary record. Tools like Etherscan (Ethereum), Solscan (Solana), and chain-specific explorers show every transaction with timestamps. Crypto tax software such as Koinly, CoinTracker, TokenTax, and ZenLedger can help automate DeFi transaction categorization, but always verify the output against on-chain records.

For airdrops: Cross-reference your wallet history against known airdrop events. Document the fair market value of each token on the date it appeared in your wallet using CoinGecko, CoinMarketCap, or exchange price data.

For LP activity: Track deposits, withdrawals, and fee accruals separately. The smart contract interactions visible on-chain are your source records.

For bridges and wrapping: Document every cross-chain transfer with the source chain, destination chain, token amounts, timestamps, gas fees, and your tax position on whether the event is taxable.

How Does Unreported Crypto Income Affect Your 1099-DA Filing?

In my comprehensive 1099-DA guide, I walk through a three-way reconciliation framework: 1099-DA vs. exchange CSV vs. on-chain data. The five events in this article live primarily in the third source: on-chain and wallet data. This is the layer most DIY filers skip, and it is where the largest compliance gaps hide.

Your return can and should include transactions that are not on any 1099-DA. Use Box I (short-term) or Box L (long-term) on Form 8949 for digital asset transactions not reported on any information return. Keep your exchange CSV and on-chain records as documentation.

The IRS has access to blockchain analytics tools, and the Information Reporting Program Advisory Committee (IRPAC) has recommended expanded digital asset data-matching capabilities. Filing based only on your 1099-DA when you had significant unreported activity is an underreporting risk.

New Jersey Filers: Why Unreported Events Cost More in NJ

If you are in New Jersey, every unreported income event and every unrecoverable loss compounds at the state level. NJ taxes all crypto gains, including DeFi gains, as ordinary income with no long-term capital gains rate distinction. NJ's graduated rate schedule reaches 10.75% for income over $1 million. And net losses in the disposition category cannot be carried forward and cannot offset income in other categories like wages.

If your DeFi losses create a net loss in NJ's disposition category for the year, that loss effectively disappears at the state level even though you may be able to deduct it federally. Conversely, unreported staking or airdrop income that should have been declared creates state exposure on top of federal.

For the full NJ analysis: How New Jersey Taxes Your Crypto: A State-by-State Gap That Catches NJ Investors Off Guard.

Frequently Asked Questions About Unreported Crypto Tax Events

Is DeFi income taxable if there's no 1099-DA?

Yes. The repeal of the DeFi broker reporting rule eliminates the form, not the tax obligation. Every DeFi swap, yield farming reward, and lending interest event is taxable under current IRS guidance and must be self-reported.

Do I need to report staking rewards if my exchange didn't send a form?

Yes. Staking rewards are taxable as ordinary income under Rev. Rul. 2023-14 regardless of whether a 1099-MISC, 1099-INT, or any other form was issued. Check your exchange for a year-end staking summary.

Are airdrops taxable if I didn't ask for them?

Yes. The IRS treats airdrops as ordinary income at fair market value when you gain dominion and control (Rev. Rul. 2019-24), regardless of whether you requested them.

What Form 8949 box do I use for DeFi and other unreported transactions?

Box I for short-term and Box L for long-term digital asset transactions not reported on any 1099-DA or 1099-B.

Can I ignore spam tokens that appeared in my wallet?

Generally yes. Spam tokens with no genuine market value and over which you did not exercise dominion and control do not create income. Do not interact with them. Attempting to swap or transfer a spam token could create a taxable event.

Is providing liquidity to a DeFi pool taxable?

The IRS has not issued definitive guidance. The conservative position is that depositing tokens and receiving LP tokens in return may be a taxable exchange. Document your position and apply it consistently.

Need Help Reporting What the 1099-DA Missed?

If your 2025 crypto activity went beyond simple exchange trades (if you staked, farmed, bridged, or used DeFi protocols), your return requires more than matching a form. Visit monacocryptotax.com or reach out via DM for a comprehensive review that includes both your 1099-DA and your full on-chain activity.

This article is for informational purposes only and does not constitute tax advice. Tax outcomes depend on your specific facts and circumstances.

Greg Monaco, CPA/MBA | NJ CPA License #20CC04711400 | Firm License #20CB00789800 | Crypto Tax: [monacocryptotax.com](https://monacocryptotax.com) | Full-Service CPA: [monacocpa.cpa](https://monacocpa.cpa)