The Internal Revenue Service (IRS), the tax agency of the United States, has unveiled a preliminary version of its new Form 1099-DA “Digital Asset Proceeds from Broker Transactions” for reporting income generated from digital asset transactions. This form is projected to be implemented in 2025 for reporting purposes in 2026.
According to the form, brokers, including kiosk operators, digital asset payment processors, hosted wallet providers, unhosted wallet providers, and others, will be responsible for preparing Form 1099-DA for each customer who sells or exchanges digital assets. Copies of the form will be distributed to customers and the IRS, who will utilize them for verification purposes.
The form requests information such as token codes, wallet addresses, and blockchain transaction locations. As per the regulation proposed in August 2023, cryptocurrencies, nonfungible tokens, and stablecoins are subject to reporting. The regulation stated:
“The crypto community expressed their opinions on the proposed reporting requirements after their announcement.”
The Blockchain Association criticized the regulation, stating that it demonstrates “fundamental misunderstandings about the nature of digital assets and decentralized technology.” Paul Grewal, the chief legal officer of Coinbase, argued that the proposed rules would establish a “dangerous precedent for surveillance of the everyday financial activities of consumers by requiring nearly every digital asset transaction — even the purchase of a cup of coffee — to be reported.” Commenters were equally dissatisfied with the reporting rules for 2024.
Tax experts have also shared their views online. Ledgible, a crypto tax and accounting service, highlighted that reporting decentralized finance, where there may not be an intermediary to fulfill the reporting requirements, will be particularly challenging under the new regulation. Additionally, brokers will be compelled to exchange information on digital asset transfers in order to accurately determine the cost basis (initial value or purchase price), but they currently lack a mechanism for data sharing. Moreover, there is no way to differentiate between self-transfers and taxable transfers if a crypto owner moves assets between exchanges.
In 2025, taxpayers who previously underreported their crypto income may face repercussions when reporting their taxes. Foreign exchange users that explicitly exclude U.S. citizens from their services will not be required to submit the form, but the IRS may still identify offshore activity if the taxpayer transfers assets to a U.S. exchange.
The IRS is open to receiving comments on the draft form.
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