The Internal Revenue Service (IRS) has released a new draft of the 1099-DA tax form, which is utilized by cryptocurrency brokers and investors to report specific digital asset transactions for the tax year 2025. This updated version represents a significant improvement over the initial draft that was introduced in April 2024.
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The updated draft regulation can be accessed on the IRS website for a period of 30 days. Several issues have been addressed through modifications to the previous rule. However, experts believe that the IRS could enhance its understanding of the situation, ultimately benefiting crypto investors globally.
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Key Updates to the IRS 1099-DA Form:
- Remove the requirement for investors to disclose their wallet address and transaction ID to address privacy issues.
- Simplify the transaction details by requiring only the date of transactions, rather than the specific time.
- Brokers should not be obligated to specify the type of brokerage on the form.
“The new Form 1099-DA will help taxpayers comply with the complex world of digital assets,” IRS Office of Digital Asset Initiative Directors Raj Mukherjee and Seth Wilks said in an email.
What some Crypto tax professionals saying
Experts in cryptocurrency taxation have lauded the updated form 1099-DA, considering it a significant enhancement compared to the earlier draft.
“The first draft was overwhelming—hard to read, hard to know what to do with the information,” said Jessalyn Dean, vice president of tax information reporting at crypto tax company Ledgible. “This version is much more readable.”
Andrew Rossow, an attorney and the CEO of AR Media Consulting, expressed that while these modifications move towards addressing privacy issues, they fall short of what is necessary; the IRS has the potential to significantly simplify the filing process for investors.
Rossow pointed out that the IRS has been concentrating its efforts on major exchanges, thereby overlooking the rapidly expanding decentralized finance sector, which operates under a distinct set of regulations. He cautioned that this approach could stifle innovation and result in an uneven competitive landscape within the industry.
The Landscape of Cryptocurrency Tax Regulations: A Path Ahead.
The recent plan was announced merely two months following the tax agency’s release of guidelines for brokers regarding the reporting of virtual currency transactions. Additionally, the statement indicated that the agency’s revised focus for the coming year will include the regulation of organized solutions, such as decentralized and self-custodied brokerage operations.
The IRS has yet to complete the final version of form 1099-DA, which may only be released for the 2025 tax year. This action by the IRS indicates a heightened focus on transparency and monitoring. While this is undoubtedly a positive step forward, the forthcoming 1099-DA form must be more tailored to individuals engaging with digital currencies.
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