Key Takeaways
IRS Notice 2026-20 extends temporary cost-basis relief for broker-held digital assets through Dec. 31, 2026.
The IRS says broker-reported acquisition dates and basis may differ from taxpayers’ own books and records for 2026 transactions.
The mismatch risk is highest for investors who use multiple exchanges, move assets into self-custody, or rely on specific lot identification.
The issue could become harder in 2027, when temporary relief expires, and broker-level records carry more weight.
Crypto investors may soon face a strange tax problem: an exchange can report one version of a trade to the Internal Revenue Service (IRS), while the taxpayer files a different version based on their own records.
That mismatch is now written into the transition period for U.S. digital asset reporting.
IRS Notice 2026-20, released in March 2026, extends temporary relief for taxpayers holding digital assets in broker custody.
The relief allows eligible taxpayers to identify which asset units were sold, disposed of, or transferred using their own books and records through Dec. 31, 2026.
The same notice also flags the core problem. The relief does not change broker information-reporting rules.
As a result, the acquisition date and basis reported by a broker for 2026 transactions may differ from the taxpayer’s own records.
IRS Extends Digital Asset Relief Through 2026
The IRS created the relief because crypto broker reporting is moving into a new phase before all systems are fully aligned.
Under the digital asset broker reporting regime, brokers began reporting gross proceeds for certain digital asset transactions from Jan. 1, 2025.
Basis reporting starts for certain transactions from Jan. 1, 2026.
Form 1099-DA is the new tax form at the center of that shift.
The IRS says brokers use it to report proceeds from, and in some cases basis for, digital asset dispositions to both taxpayers and the agency.
Taxpayers still have to report all income, gains, and losses from digital asset activity, whether or not they receive the form.
Notice 2026-20 gives taxpayers more time to rely on their own records when identifying lots of broker-held digital assets.
That can matter because different lot-selection methods can produce different tax results.
If a taxpayer does not clearly identify which units they sold, the IRS can default to the first-in, first-out (FIFO) method.
Under FIFO, the earliest-acquired units are treated as sold first.
For active crypto users, FIFO may differ sharply from the method they use in tax software, especially if they track lots across several wallets and exchanges.
Why Exchange Reports May Diverge
A user may buy Bitcoin on one exchange, move it to self-custody, transfer part of it to another exchange, and later sell it there.
The receiving exchange may see the deposit, but it may lack the original acquisition date and cost basis.
The exchange sees its own platform data. The taxpayer may have a fuller history across wallets, transfers, and earlier purchases.
Justin Zanardi, CPA and Product & GTM Lead at crypto tax platform Summ, said the mismatch could become “very common” under the 2025–2026 transition rules.
“It also happens to anyone who has moved crypto between platforms, which is most active users,” Zanardi said in comments shared with CCN.
“When an asset is transferred in, no basis or acquisition date travels with it, so the receiving exchange records the deposit date as the acquisition date and the basis as unknown.”
Zanardi said the investors most exposed include users who traded on more than one exchange, moved assets to self-custody and back, consolidated wallets, or elected their own cost-basis method for 2026.
1099-DA Raises the Stakes
The new reporting regime makes those differences more visible.
For 2025 transactions, IRS instructions say brokers are generally required to report gross proceeds on Form 1099-DA, while basis reporting is not required for sales effected in 2025.
For 2026 and later, brokers must report gross proceeds and basis information for covered securities, while basis reporting for non-covered securities remains voluntary.
The IRS has separately reminded taxpayers that most 2025 digital asset statements will not include basis, leaving taxpayers to calculate their own gain or loss.
In 2025, many users will receive information with limited data.
In 2026, basis reporting expands, but the IRS has already warned that broker-reported basis may conflict with taxpayer records under the relief period.
Zanardi said taxpayers should generally file based on their own books and records when the broker form does not reflect the full picture.
“The mechanic is Form 8949 with adjustment codes to correct the 1099-DA where it doesn’t reflect the full picture,” he said. “No basis or acquisition date travels with an asset when it’s transferred between exchanges, so the 1099-DA is working off incomplete data by design.”
Why 2027 Could Be Harder
The transition relief expires at the end of 2026. That makes 2027 the key year.
Zanardi said two things will change on Jan. 1, 2027.
The temporary protection allowing taxpayers to use their own cost-basis method and lot identifications on their own books expires.
After that, taxpayers must match the method to the exchange’s method or set it up directly with the broker. Otherwise, the taxpayer can default to the broker’s FIFO.
That can create problems for users whose exchange records are incomplete.
“You can’t instruct the broker to sell a specific lot that it doesn’t have on its ledger,” Zanardi said.
The issue is less likely to affect simple users who bought and sold only on one exchange without transfers.
It becomes more likely when users have a long transaction history, multiple accounts, self-custody activity, or tax software records that combine data from many sources.
By 2027, those histories may need cleaner alignment between taxpayer records and broker-level systems.
What Investors Should Do Now
The practical work starts with records.
Taxpayers should keep lot-level information showing what they bought, when they bought it, how much they paid, where it moved, and when it was sold.
That paper trail becomes more important when a broker form shows missing or incomplete information.
Zanardi said investors should reconcile across exchanges and wallets before filing and keep documentation supporting their lot history.
He also said users who plan to use HIFO or LIFO in 2027 should set that up with each exchange before year-end, or they may default to FIFO at the broker level.
The IRS reminder page repeats the agency’s message: taxpayers remain responsible for reporting digital asset income, gains, and losses accurately, even when broker forms are incomplete.
As 1099-DA reporting expands, taxpayers may need records that follow assets across wallets, exchanges, and transfers.
A single exchange statement may no longer capture the full history.
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