XRP holders warned of 118-day deadline for new IRS cost basis rules

New tax reporting requirements

Under current procedures, brokers have been reporting only the proceeds from digital asset sales. Starting in the 2026 tax year, brokers must begin reporting the original purchase cost, or cost basis, for covered digital asset transactions.

Many investors previously overlooked the importance of tracking purchase costs across different platforms. XRP holders should review all the places they have stored their tokens, including exchanges, hardware wallets, and other digital accounts, since these locations play a vital role under the latest IRS rules.

A broker can now be required to report both the proceeds from a sale and the original cost for covered digital assets, but may leave the cost blank if insufficient documentation exists.

Covered vs. non-covered transactions

XRP acquired and held with the same broker during 2026 qualifies as covered, which means the broker will submit both sales proceeds and cost basis information to the IRS.

However, XRP acquired before 2026, or assets transferred between different exchanges or wallets, fall into the non-covered category. In such instances, brokers may only report the sale proceeds, leaving the original purchase cost unknown for tax purposes.

Tracking cost basis across accounts

Holders with assets distributed across multiple platforms must maintain documentation showing exact units, acquisition dates, and original costs for every location. This change complicates the process for those who frequently move XRP between wallets and exchanges.

Mini dictionary: Form 1099-DA, a new IRS form introduced for reporting sales of digital assets, including proceeds and, in some cases, cost basis, which helps determine tax liabilities.

Documenting transactions and consulting professionals

He emphasized the link between digital asset activity and taxpayer identity, noting that Form 1099-DA will associate blockchain wallet addresses with personal information submitted to regulated brokers.