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IRS Releases Draft Form 1099-DA for Digital Asset Transactions
The United States Internal Revenue Service (IRS) has introduced a new reporting form, Form 1099-DA, aimed at reporting income from digital asset transactions. This form, titled “Digital Asset Proceeds from Broker Transactions,” is set to be enforced in 2025 for reporting purposes in 2026.
New Reporting Requirements for Brokers
Under the new regulations, various entities such as brokers, kiosk operators, digital asset payment processors, hosted wallet providers, and unhosted wallet providers will be required to prepare Form 1099-DA for customers engaged in selling or exchanging digital assets. Copies of the form will be sent to both customers and the IRS to facilitate verification of reported information.
Inclusion of Detailed Information
The draft form mandates the inclusion of token codes, wallet addresses, and blockchain transaction locations. This rule, proposed in August 2023, covers cryptocurrencies, non-fungible tokens (NFTs), and stablecoins to enhance the IRS’s ability to identify taxpayers involved in digital asset transactions.
Reactions from the Crypto Community
Upon the announcement of the proposed reporting requirements, the crypto community had mixed reactions. The Blockchain Association criticized the rule for its alleged misunderstandings about digital assets and decentralized technology. Similarly, Coinbase’s chief legal officer, Paul Grewal, expressed concerns about the potential financial surveillance implications of the rules.
Challenges and Concerns
Tax experts have raised concerns about the new reporting rule, particularly regarding decentralized finance transactions where intermediaries may not exist to fulfill reporting requirements. Brokers will also face an increased administrative burden due to the volume of transactions and the complexity of determining cost basis for digital asset transfers.
Global Taxation Trends
Countries worldwide are recognizing the importance of taxing cryptocurrency holdings as the digital currency market expands. For example, Brazil has implemented a tax on profits from cryptocurrencies held overseas by Brazilian nationals, while India maintains stiff taxes on crypto transactions. The UK has also urged crypto users to disclose any unpaid taxes to avoid fines.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
