Understanding Tax 1099-DA Reporting

1. Key Form: 1099-DA

The Form 1099-DA (Digital Asset Proceeds From Broker Transactions) is a new tax form specifically for digital assets.

• What it reports: It primarily tracks Gross Proceeds and cost basis from the sale or exchange of digital assets.
• Who receives it: Any user who sold, exchanged, or disposed of digital assets on the Bakkt platform.
• Filing: Bakkt sends this form directly to our mutual customers and files it with the IRS.

2. What Transactions are Reported?

Bakkt reports taxable disposals only. This means the 1099-DA will reflect:

• Sales of digital assets for fiat (e.g., selling BTC for USD).
• Exchanges of one digital asset for another (e.g., swapping BTC for ETH).
• Payments or redemptions involving digital assets.

Please Note: Basic deposits and withdrawals (moving your own crypto between wallets or platforms) are generally not reported as sales on the 1099-DA, as they are not taxable disposals.

Cost Basis & Accounting Methods

Calculating your tax liability requires knowing your Cost Basis (the original purchase price plus fees).

Tax Lot Methodologies

Your "tax lot" determines which specific units are considered "sold" first when you have multiple purchases. Bakkt is launching an API in April 2026 to allow you to select your preferred method for 2026 trading activity:

• FIFO (First-In, First-Out): The oldest assets are sold first.
• HIFO (Highest-In, First-Out): The most expensive assets are sold first, typically minimizing quick gains.
• LIFO (Last-In, First-Out): The most recently acquired assets are sold first.

Please Note: Not all brokers allow customers to choose their reporting method. If a choice isn't offered, tax forms will be calculated using the FIFO method as the industry standard default.

"Covered" vs. "Non-Covered" Assets

• Covered Assets: Assets purchased on the Bakkt platform after the IRS effective dates. For these transactions, Bakkt will eventually report both proceeds and cost basis.
• Non-Covered Assets: Any assets transferred into Bakkt from an external wallet or another exchange. Since Bakkt does not know what the user originally paid for these, the cost basis will be blank or null.
• Customer Responsibility: Customers must track and report the cost basis for non-covered assets using their own records or consumer facing tools like CoinTracker.

Integration & Delivery

Bakkt has partnered with a third party vendor to facilitate the generation and delivery of these forms to your customers.

• Separate Forms: If you have digital asset activity outside of Bakkt (such as "Earn" products or other exchanges), you will likely receive multiple 1099-DA forms.
• No Combined Filing: Due to regulatory liability, Bakkt does not "outsource" its reporting to be combined with third-party event forms. Customers should provide all 1099-DAs to a tax professional to be reconciled on Form 8949 and Schedule D.

Important Dates

• January 1, 2025: New IRS disposition reporting rules go into effect.
• January 1, 2026: New IRS cost basis reporting rules go into effect for the 2026 tax year.
• February 2026: First 1099-DA forms for the 2025 tax year will be issued.
• April 2026: Bakkt’s Tax Methodology Selection API goes live.