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The IRS has introduced a draft of the 1099-DA tax form, a new document for reporting cryptocurrency transactions. Set to impact brokers and investors, this form will track gains and losses in digital asset exchanges starting next year.
IRS Unveils Draft for First-Ever Crypto Tax Form, Seeks to Define Broker Roles and Transactions
The Internal Revenue Service of the United States has revealed what it plans to include in the first-ever cryptocurrency tax reporting form, Coindesk reported.
Observers believe the sector will require more information before the draft form is useful.
The Internal Revenue Service (IRS) of the United States has provided a glimpse of what bitcoin investors' future tax forms may look like if its much-debated rule on how cryptocurrency transactions should be reported to the federal government is finalized.
The IRS provided a draft of the 1099-DA form, which calculates taxable profits or losses when brokered digital assets change hands. The form indicates that the agency will most likely contain a list of individual token codes that can be filled out, slots for wallet addresses, and where to view transactions on the applicable blockchain.
"Brokers must report proceeds from (and in some cases, basis for) digital asset dispositions to you and the IRS on Form 1099-DA," according to the instructions included with the form, which shows a 2025 date. "You may be required to recognize gain from these dispositions of digital assets."
This announcement is preliminary and may vary depending on the final outcome of last year's proposed tax rule.
While establishing US tax practices for crypto is one necessary step toward removing investor uncertainty and confusion, cryptocurrency businesses are concerned about how the IRS will identify the digital asset brokers who will need to comply with the new system, which could include wallet providers, decentralized platforms, and payment processors.
This form version requires the filer to tick a box indicating the type of broker they are: kiosk operator, digital asset payment processor, hosted wallet provider, unhosted wallet provider, or "other."
"Some of those boxes relate to economic activity such as kiosks or payment processors, while others are customer-relationship based such as hosted or unhosted wallet provider," Miles Fuller, the head of government solutions at TaxBit, told CoinDesk. "I am curious how the IRS anticipates using this information and how certain brokers such as centralized exchanges or decentralized protocols that are covered under the current regulations may fit into these boxes."
Fuller was particularly intrigued by the Treasury Department's IRS's expectation that brokers would "use some sort of digital asset registry to identify which crypto was being sold on the form," he added. "No formal registry currently exists, so it will be interesting to see how that plays out."
IRS Seeks Feedback on Draft Cryptocurrency Tax Form, Aiming for Clarity in Reporting
Jessalyn Dean, vice president of tax information reporting at Ledgible, noted references to "wash sales" and said that the form allows transactions to be recorded internally only by cryptocurrency firms. In her analysis of the form, she argued that at least one of the boxes for non-deductible losses requires a greater explanation of how it works.
"As expected, the look and feel are similar to the Form 1099-B for reporting sales of traditional financial products," Dean said, noting the IRS has "packed a lot of lines and boxes into this form."
The IRS is asking for public feedback on the draft form. The tax agency's decision to issue a final rule is unknown, but the 2025 form suggests completion this year.
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