Starting in 2026, the "Wild West" of crypto reporting officially ends with the introduction of IRS Form 1099-DA. If you use centralized exchanges (CEXs) like Coinbase or Kraken, they are now required to send this form to both you and the IRS.
The Problem for DeFi Users
The 1099-DA is designed for "closed loops." If you buy 1 BTC on Coinbase and sell it on Coinbase, the form is accurate. But for DeFi users, the loop is almost always open:
Transfer Out: You buy ETH on Coinbase and move it to MetaMask. Coinbase reports a "transfer," but they don't know the destination.
The DeFi Gap: You swap that ETH for a new altcoin on a DEX. No 1099-DA is issued for this DEX swap.
The "Zero Basis" Danger: If you eventually move that altcoin back to a CEX to sell for cash, the CEX might issue a 1099-DA showing the "Proceeds" but with a $0 Cost Basis because they didn't see the original purchase or the DEX swap.
Avoiding the Automated Audit
The IRS uses automated "matching" software. If your tax return shows $50,000 in proceeds but your 1099-DAs suggest your cost basis is unknown, the IRS may assume your basis is $0 and send you a bill for the full amount.
The Awaken Advantage:
Our platform allows you to upload your 1099-DA forms and "overlay" them with your DeFi history. We identify "Self-Transfers" to ensure the cost basis from your Coinbase purchase correctly "attaches" to your MetaMask wallet. This creates a continuous audit trail that explains to the IRS exactly why your calculated cost basis differs from the exchange's incomplete data.