The Internal Revenue Service has simplified reporting requirements in the latest version of Form 1099-DA, which cryptocurrency brokers and taxpayers will use to report digital asset transactions.
According to August 9 to updateThe new draft removes many requirements that were part of the April version when the IRS first introduced the form.
Taxpayers are no longer required to provide information about wallet addresses and transaction IDs, as well as the exact time of each transaction, as only the date is required. This amendment comes in response to comment From the cryptocurrency industry.
In April, the IRS first revealed that Draft Form 1099-DA, which not only required detailed transaction information, but also required brokers to disclose whether they were kiosk operators, digital asset payment processors, hosted wallet providers, non-hosted wallet providers, or “other.”
The draft has been met with criticism, particularly for including non-hosted wallet providers as intermediaries. Critics have pointed out that these providers do not have access to the nature of transactions or the identities of the parties involved.
The latest update removes the requirement for taxpayers to specify “intermediary type,” among other changes, to better align with the realities of the digital asset industry.
The crypto community welcomed the change, with some call It’s a step in the right direction.
Attorney Drew Hinkes of law firm K&L Gates described the updated model as “significantly improved” because it requires “much less data reporting.”
The Blockchain Association, an industry advocacy group, had previously announced that to caution Previous requirements could have resulted in compliance costs of up to $254 billion.
The model is expected to go into effect in tax year 2025, if approved, with returns due in April 2026. The IRS also invited the public to provide comments on the draft model within 30 days.
Form 1099-DA originally stems from reporting rules proposed by the IRS and Treasury Department in August 2023 as part of the Infrastructure Investment and Jobs Act passed in 2021. The idea was to treat cryptocurrency brokers like their traditional counterparts.
IRS Commissioner Danny Wuerfel said at the time that the rules were designed to close the tax gap and ensure consistent tax treatment across different asset classes.
the suggestion The definition of intermediaries was broad, including trading platforms, payment processors, and some hosted wallets. Decentralized exchanges were also included in the reporting requirements.
At that time, the Treasury Department It has been explained. The main issue was not how the platform would work, but ensuring that all digital asset transactions were reported, regardless of the platform.
Critics in the crypto sector were quick to raise concerns about the potential impact on decentralized finance platforms like Uniswap. Later, in Final draft Released in June 2024, decentralized exchanges and self-custodial wallets are exempt from reporting requirements.