The crypto-tax SERP for Canadian founders has filled up with "1099-DA explainers" since the form went live for 2025 transactions. They cover the broker side (who issues, when, gross proceeds vs cost basis) without answering the question Canadian-owned LLC owners actually have: my Wyoming LLC just got a 1099-DA from Coinbase under its EIN, what does the IRS expect me to file, and how does that flow through to my T1 in Canada. The §864(b)(2) trading safe harbor and the LLC's disregarded-entity status make the answer narrower than the 1099-DA suggests. This post walks through the gate.
30-second answer
If your Canadian-owned single-member US LLC trades crypto on Coinbase, Kraken, or Gemini, those US-based exchanges will issue a Form 1099-DA in your LLC's EIN for 2025 transactions starting January 31, 2026, reporting gross proceeds. For 2026 transactions filed in 2027, the form will also include cost basis. The fact that 1099-DA is issued does not by itself create a US tax liability. Your single-member LLC is disregarded, so the IRS looks through to you, the Canadian-resident owner. As a non-resident alien (NRA) trading on your own account, you can usually rely on IRC §864(b)(2), the trading safe harbor: trading in stocks, securities, and (by extension) commodities through US brokers on your own account is not a US trade or business. By long-standing IRS practice, crypto trading on your own account fits the same shape, although the statute does not name digital assets. Net result: most pure trading activity through your Canadian-owned LLC produces no US federal income tax even with a 1099-DA. CRA, however, sees all of it. Capital gains are 50 percent included in your Canadian taxable income (or 100 percent if it is business income), and T1135 (cost amount over CAD $100,000) and Form 1040-NR (if any US ECI exists) still need to be filed on time.
What 1099-DA actually reports
Form 1099-DA is the IRS's new digital-asset broker reporting form, mandated by IRC §6045 as amended by the Infrastructure Investment and Jobs Act of 2021 and finalized in Treasury regulations issued in 2024. The 2025 transition rules are critical for cross-border founders.
| Tax year | What 1099-DA includes | When LLC receives it |
|---|---|---|
| 2025 transactions | Gross proceeds only | January 31, 2026 |
| 2026 transactions | Gross proceeds plus cost basis (covered securities) | January 31, 2027 |
| 2027 transactions | Wallet-by-wallet cost basis tracking required | January 31, 2028 |
The transition rules under Rev. Proc. 2024-28 and Notice 2025-7 let taxpayers elect either wallet-by-wallet cost basis (segregated by exchange and wallet) or universal cost basis (single pool across all wallets) for periods before the 2026 wallet-by-wallet mandate. The election is one-way and matters because brokers will use wallet-by-wallet from 2026 onward. If your LLC moved coins between wallets in 2024 and 2025 and you used universal cost basis on prior returns, reconciling against a wallet-by-wallet 1099-DA in 2027 will be tedious.
The §864(b)(2) trading safe harbor
A non-resident alien who trades stocks, securities, or commodities for their own account through a US broker is not engaged in a US trade or business under IRC §864(b)(2). This was written for portfolio investing in equities and bonds; the IRS extended it to commodity futures by regulation. Crypto is not named in the statute, and the Treasury has not issued definitive guidance, but the predominant practitioner view treats own-account crypto trading as falling within the same shape: passive trading on your own account through a US exchange is not a US trade or business.
The safe harbor matters because if your trading is not a US trade or business, capital gains on the trades are not US-source under §865(a) (a general rule that gains follow the seller's residence) and are not subject to US tax in the hands of an NRA. The 1099-DA gets issued anyway because the broker reports based on the LLC's W-9 and EIN, not based on whether the underlying owner has a US tax liability.
What kicks you out of the safe harbor:
- Trading on behalf of others (managed account for clients) → US trade or business
- Operating an exchange or making a market → US trade or business
- Mining at scale, validating as a service, or running a node business → likely US trade or business
- Wages or services paid in crypto → ECI, taxable in US under wage rules
If your LLC's only crypto activity is buying and selling on Coinbase or Kraken with your own funds, the safe harbor usually applies. If your LLC stakes for others, makes markets, or runs validators commercially, it does not.
Exchange onboarding: W-9 or W-8BEN-E
When your Canadian-owned LLC opens a Coinbase or Kraken business account, the exchange asks for a tax form. The right answer depends on the LLC's classification.
Single-member LLC (disregarded): For US persons, the SMLLC files W-9 in its own name and EIN. For foreign owners, the IRS rules under Reg. §1.1441-1(b)(3) say the disregarded SMLLC is "looked through" to its owner for withholding purposes. The exchange should collect a W-8BEN-E in the LLC name (with the owner's NRA status), not a W-9. In practice, exchanges differ. Coinbase has historically asked for W-9 from any US-domiciled LLC regardless of owner status, then issued 1099-K or 1099-DA under the LLC's EIN. Some exchanges support W-8BEN-E for foreign-owned SMLLCs; others do not.
Multi-member LLC (partnership): Files W-9 as a US partnership. The partnership then issues Schedule K-1 to each member. Foreign members complete W-8BEN/W-8BEN-E with the partnership.
LLC that has elected corporate taxation (Form 8832): Files W-9 as a US corporation. 1099-DA is issued in the LLC's EIN. The corporation is the taxpayer regardless of owner residency.
The practical consequence: if your SMLLC submitted W-9 to Coinbase (because that is what Coinbase's onboarding flow defaulted to), 1099-DA arrives in your LLC's EIN. The form goes to the IRS. You then have a reconciliation question: even though the safe harbor likely applies and no US tax is owed, the IRS computer will see proceeds reported under the LLC's EIN with no matching tax return. Filing Form 1040-NR with a $0 result and a Form 8833 treaty position disclosure is the cleanest way to clear the matching record. Some practitioners file Form 1120-F at zero instead.
The seven activity types
Crypto activity is not one thing. The tax treatment splits along seven categories, and your LLC may hit several in a year.
| Activity | US treatment for NRA owner | CRA treatment |
|---|---|---|
| Spot trading (buy/sell BTC, ETH) | §864(b)(2) safe harbor — usually no US tax | Capital gains 50% inclusion, or business income 100% if frequent |
| Stablecoin swap (USDC ↔ USDT) | Each swap is a taxable disposition under Notice 2014-21 | Same as trading |
| Crypto-to-crypto trade (BTC → ETH) | Disposition of BTC at FMV, acquisition of ETH at FMV | Same |
| Staking (validator rewards) | Income at FMV when received (Rev. Rul. 2023-14). Could be US trade or business if commercial scale | Business or property income at FMV |
| Mining (proof of work) | Income at FMV when mined. Frequently US trade or business if active | Business income |
| NFT minting/sale | Capital gains for collectibles (28% max rate if held >1 year). Creator royalties = ordinary income | Capital gain or business income |
| Crypto-as-payment (payments to your LLC for services) | Ordinary income at FMV. Source rule applies (where services performed). Connected to LLC's main activity | Business income |
The takeaway: pure trading and stablecoin swaps usually fall in the safe harbor. Mining, staking-as-a-service, payment processing in crypto, and NFT royalty income usually do not. A single LLC can have a mix.
Five worked scenarios
Scenario 1: $200,000 of BTC/ETH trades, Wyoming SMLLC, Canadian individual owner
Canadian owner trades Bitcoin and Ethereum on Coinbase Pro using only the LLC's funds. Annual realized gain $50,000. Coinbase issues 1099-DA showing $200,000 gross proceeds.
Right answer: §864(b)(2) safe harbor applies. No US federal tax. CRA reports $50,000 as a capital gain — 50 percent inclusion rate, $25,000 added to taxable income at the owner's marginal rate. File Form 1040-NR with zero US tax and Form 8833 treaty disclosure to clear the IRS matching record. T1135 if cost amount over CAD $100K.
Scenario 2: Mining at home in Toronto, equipment in a Vancouver data center
Canadian owner runs an Ethereum proof-of-stake validator from a Vancouver data center. The LLC owns the equipment. Annual rewards $40,000.
Right answer: probably not a US trade or business because the validators are physically in Canada. Income is Canadian-source business or property income. CRA taxes it as business income at 100 percent inclusion. US side: file 1040-NR or 1120-F at $0 with Form 8833 explanation. The 1099-DA from any US exchange where rewards are eventually sold reports the proceeds piece, not the staking income piece.
Scenario 3: NFT collection sold for $300,000, all on US marketplaces
Canadian owner mints an NFT collection on OpenSea from Wyoming LLC's wallet, sells $300,000 worth in 2025 to US buyers.
Right answer: NFT minting and selling is a creative activity that may be characterized as US trade or business if conducted from the US, or as portfolio investment if held passively. If the LLC held the NFTs for over a year and sold them, the gain is collectibles capital gain (US doesn't tax NRAs on most capital gains). If the LLC is the creator and earning royalties on resales, that royalty is US-source if the buyer is in the US — 1042-S withholding applies. CRA: business or capital, 50/100 percent inclusion depending on classification.
Scenario 4: Staking for clients (commercial validator service)
Canadian-owned LLC runs validators for client tokens (delegation as a service), earning 5 percent of staking rewards as a fee. Annual fees $80,000.
Right answer: this is a US trade or business by character (services provided to clients via the network). 1040-NR with US ECI on Schedule 1, US federal tax at graduated rates. CRA includes the same income at 100 percent. Foreign tax credit on the US tax against Canadian tax. Track every reward to USD FMV at receipt.
Scenario 5: $50,000 USDC payment to LLC for SaaS services to US customers
Canadian-owned LLC accepts USDC payment for SaaS work delivered to US customers. The $50,000 is paid in USDC, immediately swapped to USD. The work was performed remotely from Toronto.
Right answer: $50,000 is US-source service income only if services performed in US. Services done from Toronto = foreign-source business income. Treaty Article VII (no PE) protects from US tax. 1040-NR at $0 with Form 8833 treaty position. CRA: business income at 100 percent inclusion. The USDC-to-USD swap is technically a separate disposition of USDC, but realized gain on stablecoin same-day is usually de minimis.
Cross-border reconciliation: 1099-DA to T1
Receiving a 1099-DA does not relieve the Canadian taxpayer of CRA reporting. It also does not by itself create US tax. The reconciliation runs in three lines:
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CRA T1 reporting: every taxable disposition (sell, swap, payment in crypto, NFT sale) gets reported in CAD using FX rate at transaction. Crypto held as capital property → 50 percent inclusion. Crypto held as inventory or active business → 100 percent inclusion.
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T1135 Foreign Income Verification: if the cost amount of foreign property (including crypto held in foreign exchanges) plus the LLC's other foreign property exceeds CAD $100,000 at any point in the year, T1135 is due. Crypto on US exchanges in your LLC's name counts as foreign property held by you indirectly through the LLC. We cover the trigger and the cost amount calculation in our T1135 guide for Canadian-owned LLC owners.
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US 1040-NR (or 1120-F): file even at zero, with Form 8833 disclosing the §864(b)(2) safe harbor or the Article VII business profits position. This neutralizes the IRS matching against the 1099-DA. Failing to file means the IRS has proceeds reported with no return — automatic CP2000 notice in 18 to 24 months.
Non-US exchanges and the Foreign Account question
If your LLC trades on Bybit, OKX, Binance.com (non-US), or Kraken Global, no 1099-DA is issued. The CRA reporting still applies. The US-side question: does the LLC itself have an FBAR or 8938 obligation?
FBAR (FinCEN 114): filed by US persons with foreign financial accounts over $10,000. Your LLC is a US person for FBAR purposes (formed under US state law). If your LLC's aggregate foreign exchange balances exceed $10,000 at any point in the year, the LLC files FBAR. The FinCEN guidance on whether crypto-only foreign accounts trigger FBAR has shifted; the 2020 Notice 2020-2 said FBAR did not yet apply to crypto-only accounts, but a future regulation may extend it. As of 2026, crypto-only accounts on foreign exchanges have not been brought into FBAR by regulation, but accounts that mix fiat and crypto on a foreign exchange likely do.
Form 8938 (Statement of Specified Foreign Financial Assets): filed with Form 1040 by certain US taxpayers above thresholds. NRAs filing Form 1040-NR are usually exempt from Form 8938 unless the LLC has elected to be treated as a domestic corporation.
CRA T1135 is the parallel disclosure on the Canadian side. Crypto on foreign exchanges held through the LLC counts as Canadian-resident-owner foreign property and feeds into the cost amount.
Frequently asked questions
Coinbase issued 1099-DA in my LLC's EIN. Does this mean I owe US tax? Not by itself. The 1099-DA is broker reporting. Whether you owe US tax depends on whether the underlying activity is US trade or business or US-source FDAP. Pure NRA-owned trading usually falls in the §864(b)(2) safe harbor.
Should my LLC file 1040-NR even if no tax is due? Yes — file at zero with Form 8833 treaty position. This clears the IRS matching against the 1099-DA. Some practitioners file Form 1120-F at zero instead; either approach works if disclosed correctly.
My LLC was formed for crypto trading specifically. Does that change the safe harbor? Single purpose does not by itself defeat the safe harbor. What matters is whether the activity is on your own account (safe) or for others (not safe), and whether the activity rises to commercial-scale operations (mining business, market making, dealer activity).
What if my LLC has both trading and mining? Treat each activity separately. Trading proceeds may fall in the safe harbor; mining is usually a US trade or business if the equipment is in the US. The LLC files one 1040-NR/1120-F that includes both, with the mining piece on Schedule 1 as ECI.
Does CRA accept the 1099-DA as documentation for my T1? No. CRA wants CAD-denominated transaction-level records. The 1099-DA is a US summary in USD that aggregates by year. You need a transaction log (CoinTracker, Koinly, etc.) that converts every disposition to CAD at the day's rate.
What about staking rewards: when is income recognized? Under Rev. Rul. 2023-14, rewards are income when the taxpayer has dominion and control. For most validators that is the moment rewards are credited to the wallet. CRA treats them as income at FMV at receipt for business or property income classification.
Are stablecoin swaps really taxable? Yes. USDC for USDT or USD for USDC is a disposition of property under Notice 2014-21. Same-day swaps usually have de minimis gain or loss, but they are still reportable transactions.
FBAR for crypto on foreign exchange — yes or no? As of 2026, crypto-only accounts on foreign exchanges are not within FBAR scope by current FinCEN guidance, but mixed crypto/fiat accounts likely are. Treasury has signaled future regulation may include crypto. Conservative practice files FBAR if there is any fiat balance over the threshold.
Does §864(b)(2) cover trading altcoins and meme coins? The statute says "stocks, securities, or commodities." Crypto is not named. Practitioner consensus extends the safe harbor to all crypto trading on own account; the IRS has not contradicted this. If your LLC trades exotic NFTs or DeFi tokens with limited markets, the analysis is more fact-specific.
The 1099-DA is a reporting form, not a tax. For Canadian-owned US LLCs trading on their own account, the IRS already has a safe harbor that usually neutralizes the US tax even when 1099-DA arrives. The work is on the reporting and reconciliation side: file 1040-NR at zero, file T1135 if over the threshold, and keep wallet-level records that survive a CRA audit.