IRS Unveils Form Your Broker May Send Next Year to Report Your Crypto Moves

The IRS has proposed a new 1099-DA form for reporting taxable income or losses from the sale of digital assets through brokers. This form is expected to include specific token codes for individuals, as well as fields for wallet addresses and blockschain transaction locations.

Starting in 2025, brokers are expected to provide you and the IRS with information about the profits from your digital asset sales, as well as the cost basis in some instances, using Form 1099-DA. You might need to record capital gains from these digital asset transactions.

The reveal we’re making now is tentative and could be subject to modifications based on the ultimate decision of last year’s proposed tax rule for cryptocurrencies. Setting up clear U.S. tax guidelines for crypto investments is crucial in reducing doubt and ambiguity, but crypto businesses are concerned about how the IRS intends to pinpoint the digital asset intermediaries required to adhere to this new framework – possibly implicating wallet service providers, decentralized exchanges, and payment processors.

In this variation of the application, you will be required to select a checkbox representing the category of broker you belong to: kiosk operator, digital asset payment processor, hosted wallet provider, unhosted wallet provider, or choose the option “other” if none of these labels fit your description.

According to Jessalyn Dean, Vice President of Tax Information Reporting at Ledgible, the new form resembles the 1099-B form in appearance and functionality, as previously anticipated. Moreover, she pointed out that the IRS has included an impressive number of lines and boxes in this particular form.

Dean highlighted the mention of “alleged wash sales” and explained that certain crypto transactions are merely documented within these companies’ internal records, not reflected in external reports. She expressed the need for clearer instructions regarding at least one section for non-taxable losses.

Miles Fuller, the leader of government solutions at TaxBit, expressed excitement over the recently released draft in a LinkedIn post.

In his writing, he mentioned that the regulation draft includes a requirement to share wallet addresses and transaction hashes when necessary. This aspect drew significant criticism from various quarters, and he wonders if this will be modified in the upcoming final regulations.