The Chamber of Digital Commerce, a prominent trade association in the blockchain industry, has submitted its response to the United States Internal Revenue Service’s (IRS) proposed Form 1099-DA, which is designed for reporting digital asset transactions.
In its detailed feedback, the chamber emphasizes the importance of simplifying the form to make it more user-friendly for brokers who deal with digital assets like cryptocurrencies. It also addresses privacy concerns by suggesting that only necessary information should be requested for reporting digital asset transactions by taxpayers.
The chamber criticizes the draft form for soliciting excessive information and proposes that the final form should only require information essential for basic tax reporting. Additional details can then be retained by brokers for use during specific IRS examinations.
The blockchain advocacy group also raises concerns about the form’s request for sensitive information like transaction IDs and digital asset addresses. It argues that collecting such details could compromise taxpayer privacy and suggests that they should only be obtained if there are suspicions of criminal activity.
The feedback highlights that the draft form implies the need for specific broker instructions, which were not included. The chamber advises the IRS to release the instructions for public review before finalizing the form to ensure accurate completion by brokers.
Additionally, the chamber suggests that the form should allow brokers to indicate if a digital asset is subject to a different tax rate, such as non-fungible tokens that may be treated as collectibles and taxed at a higher rate. This would help prevent errors in IRS processing and ensure accurate tax reporting.
The IRS released the draft form on April 18 and invited comments. The chamber’s input follows its previous comments on related proposed regulations submitted in November 2023.
According to the draft 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 every customer who sells or exchanges digital assets.
After announcing the proposed reporting requirements, the crypto community expressed its opinions. The Blockchain Association stated that the rule demonstrates “fundamental misunderstandings about the nature of digital assets and decentralized technology.”
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