The IRS in the US has proposed a new tax form, called Form 1099-DA or “Digital Asset Income from Brokers,” for reporting cryptocurrency earnings. This draft is now available for feedback from concerned parties before its final version is released by the IRS.
IRS Aims To Launch Crypto Tax Form By 2025
Starting from August 2023, the US Treasury Department and Internal Revenue Service (IRS) introduced proposed regulations. These regulations require crypto brokers and exchanges to disclose certain digital asset transactions. The intention behind this is to maintain a level playing field for all participants in the financial sector.
The 2021 Infrastructure Investment and Jobs Act included proposals to enhance transparency regarding crypto transactions handled by brokers. Approximately eight months following the act’s passage, the Internal Revenue Service (IRS) has unveiled a sneak peek of the tax form designed for this purpose.
Significantly, Form 1099-DA identifies brokers as operators of kiosks, digital asset payment processors, providers of hosted wallets, and unhosted wallet suppliers. In simpler terms, this encompasses centralized and decentralized trading platforms, non-custodial wallets, and Bitcoin Automated Teller Machines (ATMs).
Traders will need to submit details on their digital asset transactions to the form, including the digital asset’s address, ID of the sale transaction, quantity of digital assets traded, and security status. The IRS plans to implement Form 1099-DA starting from January 2025, while digital asset brokers are anticipated to begin distributing this tax form to traders/investors from January 2026.
The new IRS form may pose challenges for taxpayers, one of which is the disclosure of undeclared crypto transactions, increasing the risk of criminal tax probes. Additionally, using Form 1099-DA could bring up other complications related to self-transfers, digital asset broker exchanges, and deals with foreign platforms.
Crypto Community Opposes Latest IRS Draft
The crypto community, in anticipation of the reaction, has voiced criticism towards some parts of the IRS Form 1099-DA. Ji Kim, legal and policy officer at Crypto Council for Innovation, has shared her disappointment with the IRS for categorizing “unhosted wallet providers” as brokers.
In a recent post on X, Kim pointed out that the IRS does not seem to understand or acknowledge the limited access wallet providers have to users’ transaction details and identities when presenting such a listing. On the other hand, Shehan Chandrasekara, the Head of Tax Strategy at CoinTracker.com, expressed concerns that the proposed tax form could potentially undermine the privacy and pseudo-anonymity within the US crypto community.
Currently, the initial version of Form 1099-DA is open to suggestions, meaning some parts of the form could be modified based on collective input.
Total crypto market cap valued at $2.262 trillion on the daily chart | Source: TOTAL chart on Tradingview.com
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2024-04-20 13:11