Anika Begay
The IRS, or US Internal Revenue Service, has unveiled a new draft of the 1099-DA tax form, which cryptocurrency brokers and investors will use to report certain digital asset transactions starting in the upcoming 2025 tax period. The new version is a significant improvement over the original draft submitted in April 2024.
The new draft regulation is available on the IRS website for the next 30 days. There are issues that have been addressed with the change in this latest rule. But experts believe that for the benefit of cryptocurrency investors everywhere, the IRS could come to a better understanding of things.
Key changes in the updated IRS Form 1099-DA:
– Eliminate the requirement for investors to disclose their wallet address and transaction ID, a privacy concern
– Remove the requirement to include the time the transactions occurred, only the date is required
– Brokers do not have to indicate in the form what type of brokerage they are interested in
“The new Form 1099-DA will help taxpayers comply with the complex world of digital assets,” Raj Mukherjee and Seth Wilks, directors of the IRS’s Office of Digital Asset Initiative, said in an email.
What are they saying?
Cryptocurrency experts have praised the revised Form 1099-DA, calling it a significant improvement over the previous 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 firm Ledgible. “This version is much more readable.”
Andrew Rossow, an attorney and CEO of AR Media Consulting, said these changes come close to protecting privacy, but they are still not enough: The IRS can do much more to simplify the filing process for investors.
Rossow explained that while the IRS was busy focusing on centralized exchanges, it was ignoring this growing decentralized financial ecosystem that actually has different rules for operating. This will stifle innovation, he said, and create an unlevel playing field in this space.
The World of Cryptocurrency Tax Regulations: The Way Forward
The new plan comes just two months after the IRS issued rules for brokers to report virtual currency transactions. The statement also said that the treatment of organized solutions, such as decentralized and self-custodial brokerages, will be part of its new direction in the coming year.
The IRS has not yet finalized Form 1099-DA; it may not be released until the 2025 tax year. Clearly, the IRS’s move in this direction shows a greater emphasis on disclosure and observation. While it is certainly a move in the right direction, the new Form 1099-DA needs to be geared much more toward people who are dealing with virtual money.
Featured image from CNN, chart from TradingView
