The US IRS (Internal Revenue Service) has released a new draft of the 1099-DA tax form, which will be used by crypto brokers and investors to report certain digital asset transactions starting with the upcoming 2025 tax period. The new version is a significant advancement over the original draft, which was released 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 final rule, but experts believe the IRS could get a better handle on things for the benefit of crypto investors everywhere.
Important changes in the updated IRS Form 1099-DA:
– No longer requiring investors to disclose their wallet address and transaction ID, a privacy issue
– No longer forced indication of the time of the transaction, only the date is required
– Brokers do not have to indicate on the form what type of brokerage activity they are involved in
“The new Form 1099-DA will help taxpayers navigate the complex world of digital assets,” IRS Office of Digital Asset Initiative directors Raj Mukherjee and Seth Wilks said in an email.
What they say
Crypto tax experts praised the revised Form 1099-DA as a huge 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, attorney and CEO of AR Media Consulting, said the changes come closer to protecting privacy but are not enough, and the IRS could do much more to simplify the filing process for investors.
Rossow explained that while the IRS has focused on centralized exchanges, it has ignored the growing decentralized financial ecosystem, which actually operates under different rules. This will stifle innovation and create an unlevel playing field in the industry, he said.
The World of Cryptocurrency Tax Regulations: The Road Ahead
The new plan comes just two months after the tax authority issued rules for brokers to report virtual currency transactions. The statement also said that the treatment of organized solutions, such as decentralized and self-governing brokerage firms, will be part of the 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. The IRS’s move in this regard clearly shows that there is more emphasis on disclosure and observation. While the new Form 1099-DA is certainly a step in the right direction, it needs to be much more focused on people who handle virtual money.
Featured image from CNN, chart from TradingView
