Why selecting a 1099-DA solution is no longer just a software decision.
The IRS's new digital asset reporting requirements have fundamentally changed how financial institutions must think about tax information reporting. What was once a relatively straightforward software procurement process has become an enterprise-wide operational initiative involving tax, compliance, legal, engineering, customer service, product, and technology teams.
For institutions preparing to comply with Form 1099-DA, selecting a software provider isn't simply about checking boxes on a feature list. It's about building an operating model that can withstand evolving regulations, scale with new digital asset products, and support customers through an increasingly complex reporting landscape.
Too often, organizations approach procurement the same way they would any other technology purchase—drafting an RFP, sending it to vendors, comparing pricing, and selecting the provider with the highest feature score. While that process may work for many enterprise software purchases, digital asset tax reporting introduces complexities that require a different approach.
In a recent webinar featuring experts from Ledgible, Sovos, and Comply Exchange, the discussion centered on one key theme: successful implementations begin long before software is selected. They begin with asking the right questions.
Digital Asset Reporting Is Different
Traditional tax reporting systems were designed around well-understood financial products. Digital assets introduce entirely new considerations that don't fit neatly into legacy workflows.
A single institution may need to report transactions involving cryptocurrencies, staking rewards, NFTs, tokenized securities, stablecoins, and other emerging digital asset classes—each potentially carrying different reporting, withholding, and cost basis requirements. The challenge isn't simply generating a Form 1099-DA; it's understanding the underlying business processes that produce the data required to generate one accurately.
That complexity makes vendor evaluation significantly more strategic than comparing feature lists.
Before You Write an RFP, Build Your Operating Model
One of the biggest themes throughout the webinar was that organizations often jump directly into software evaluation before understanding what they're actually trying to accomplish.
A successful RFP begins with defining the institution's operating model.
That means identifying:
- Which products are in scope
- Which teams own different parts of the reporting lifecycle
- Which tax obligations apply
- What customer experience the institution wants to provide
- How success will ultimately be measured
As Wendy Walker, VP of Regulatory Affairs at Sovos, noted, the opening sections of an RFP provide suppliers with the context they need to propose an effective solution. Without that context, vendors are left making assumptions—and assumptions rarely lead to successful implementations.
Procurement Is No Longer Just a Tax Decision
One of the most valuable insights from the webinar was the emphasis on stakeholder involvement.
Digital asset reporting touches far more than the tax department.
Engineering teams own transaction data.
Compliance teams interpret regulations.
Legal teams evaluate risk.
Product teams define customer experiences.
Customer service teams ultimately answer questions when tax forms arrive.
Ignoring any of these stakeholders can create costly gaps that only become visible during implementation.
Jessalyn Dean, Senior Policy Advisor for U.S. Tax Reporting at Ledgible, shared an example where organizations heavily weighted regulatory compliance during vendor selection, only to realize later that customer service capabilities should have carried far more influence.
A technically compliant solution that creates a poor customer experience can still become an operational failure.
Four Capabilities Every Institution Should Evaluate
Although every organization has unique requirements, the webinar identified four foundational service areas that every digital asset reporting RFP should address.
1. Payee Data Collection
Tax reporting starts with accurate customer documentation.
Institutions should evaluate how providers collect, validate, maintain, and monitor tax documentation throughout the customer lifecycle—not simply at account opening.
Questions around W-8s, W-9s, TIN validation, document expiration, and remediation processes all become critical evaluation criteria.
2. Tax Withholding
Withholding is more than calculating percentages.
Providers should demonstrate how they determine applicable withholding rates, distinguish between U.S. and non-U.S. persons, support treaty rates and exemptions, and integrate withholding decisions into operational workflows.
As the webinar emphasized, choosing not to serve certain customer groups does not eliminate withholding obligations. Institutions still need systems capable of making those determinations correctly.
3. Cost Basis Tracking
Perhaps the biggest differentiator between traditional reporting platforms and digital asset solutions is cost basis.
Depending on the institution's business model, providers may need to calculate and maintain tax lots across crypto-native assets, tokenized financial products, transfers, customer-provided basis information, and multiple lot relief methodologies such as FIFO, LIFO, or HIFO.
Not every institution requires these capabilities—but every institution should determine whether they do before issuing an RFP.
4. Tax Information Reporting
Generating forms represents only the final step.
Organizations should also evaluate:
- IRS IRIS readiness
- State reporting
- Recipient statement delivery
- Corrections processing
- B Notices
- Managed services
- Annual filing operations
Reporting doesn't end when a file is transmitted to the IRS. It continues through corrections, customer support, reconciliations, and ongoing compliance operations.
Look Beyond Features
Software demonstrations often focus on features.
Successful RFPs focus on operational outcomes.
Can the provider scale with transaction volumes?
How are regulatory updates managed?
How are reconciliation issues identified?
What implementation resources are available?
How does the platform integrate with existing systems?
These operational questions frequently determine project success more than individual product features. The webinar repeatedly emphasizes that implementation planning, reconciliation, reporting controls, and managed services should all be considered during procurement—not after contracts are signed.
The Goal Isn't Just Compliance
Ultimately, Form 1099-DA compliance is only one objective.
The larger goal is creating an operating model that supports future growth in digital assets.
Institutions continue to introduce new products, new custody models, new tokenized assets, and new customer experiences. The reporting platform selected today should be able to evolve alongside those business changes rather than requiring another procurement process every time regulations or products change.
That makes vendor selection a strategic business decision—not simply a compliance project.
Learn From the Experts Who Built the Framework
Building an effective RFP for digital asset tax reporting requires more than adapting a traditional software procurement template. It requires understanding the operational, regulatory, and technical considerations unique to digital assets.
In the on-demand webinar, experts from Ledgible, Sovos, and Comply Exchange walk through a complete RFP framework, discuss common implementation pitfalls, and share practical guidance for evaluating digital asset tax reporting providers.
Watch the webinar: https://ledgible.io/on-demand-webinar-building-a-1099-operating-model-for-success
Whether your institution is preparing for its first Form 1099-DA reporting cycle or refining an existing operating model, investing time in the planning process today can help avoid costly implementation challenges tomorrow.
