The IRS can see what you sold. It can't see what you paid. That's the whole problem at the center of crypto tax season 2026. Form 1099-DA, the IRS's new digital asset reporting document, began arriving in investor mailboxes this month. The form tells the federal government exactly how much crypto each taxpayer sold. What it doesn't tell them is what that crypto originally cost. The gap between those two numbers is the only thing that matters for calculating taxes. And right now, the IRS is only getting half the equation. Kent Miller Photography Janna Scott, founder of DeFi Tax , calls this a recipe for disaster. "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." Proceeds Without Purchase Price Capital gains tax works on a simple formula: sale price minus purchase price equals taxable gain. An investor who bought Bitcoin for $30,000 and sold it for $35,000 owes taxes on $5,000—not on $35,000. But the 1099-DA only reports the $35,000. The purchase price—what tax professionals call cost basis—is missing entirely for 2025 transactions. Brokers won't be required to report it until next year, and even then, only for assets purchased on or after January 1, 2026 that never left the exchange. Anything bought earlier, transferred between platforms, or held in a personal wallet will show no basis at all. The IRS receives copies of every 1099-DA. Its automated systems match those forms against tax returns. When the numbers don't align, notices follow. Scott spent two years researching these dynamics before launching DeFi Tax this month. Her work included collaboration with the SEC, IRS, and academic institutions. "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." The Platforms That Don't Report The 1099-DA covers centralized exchanges—Coinbase, Kraken, Gemini. It does not cover decentralized protocols, self-custody wallets, liquidity pools, token bridges, or cross-chain swaps. A rule requiring decentralized platforms to begin reporting in 2027 was repealed earlier this year. That activity now falls entirely outside federal oversight. For investors who operate across both worlds—buying on a DEX, selling on Coinbase—the 1099-DA captures only the exit. The entry is invisible. Scott said this is where most tax software fails. "Bridging isn't selling, and wrapping isn't disposal, but most software treats them that way," she said. "DeFi activity exposes the cracks in legacy tax logic." Platforms that allow manual edits make the problem worse. Adjusting a timestamp or reclassifying a transaction might fix an error on screen, but it destroys the documentation trail an auditor expects. "Automation without transparency is just a faster risk," Scott said. Reading From the Chain DeFi Tax doesn't import CSVs. It doesn't accept exchange exports. It reads transaction data directly from the blockchain—the immutable ledger where every crypto transaction is permanently recorded. Users cannot edit the underlying data. The same wallet produces the same 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 makes a distinction between generating a number and generating proof. "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." Five Weeks to April 15 The filing deadline is approaching. Investors who haven't reconciled their records across every platform and wallet they've used are running out of time. "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." Scott's advice is direct. "Don't wait until tax season or an audit to understand your exposure," she said. "If you can't explain your report today, that's a signal to fix it." The confusion this season, she added, reflects a basic misread of investor behavior. "Most people aren't trying to avoid crypto taxes," Scott said. "They're trying to understand them." Defix Tax Janna Scott support@defitax.us 30 N Gould StSte RSheridan, WY. 82801 Contact info is on their site: https://defitax.us/contact Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.