The Internal Revenue Service has simplified reporting requirements in the latest version of Form 1099-DA, which crypto brokers and taxpayers use to report digital asset transactions.
According to an Aug. 9 update, the new draft removes several requirements that were part of the April version when the IRS first introduced the form.
Taxpayers will no longer be required to provide information about wallet addresses, transaction IDs, or the exact time of each transaction, but only the date. This change was made following feedback from the cryptocurrency industry.
In April, the IRS first released a draft Form 1099-DA that not only requested more 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 bill drew criticism, particularly for listing non-hosted wallet providers as brokers, who critics noted would 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 a “broker type” among other changes to better align with the realities of the digital asset industry.
The crypto community welcomed the change, with some calling it a step in the right direction.
Drew Hincks, an attorney with law firm K&L Gates, said the updated form is a “vast improvement” because it involves “significantly” less data reporting.
The Blockchain Association, an industry advocacy group, previously warned that the previous requirements could result in compliance costs of up to $254 billion.
If approved, the form would go into effect for the 2025 tax year, with filing due in April 2026. The IRS is also soliciting public comment on the draft form within 30 days.
Form 1099-DA originates from reporting regulations proposed by the IRS and Treasury Department in August 2023 as part of the Infrastructure Investment and Jobs Act originally passed in 2021. The idea was to treat crypto brokers similar to traditional brokers.
IRS Commissioner Danny Wuerfel said at the time that the rules were designed to eliminate tax disparities and ensure consistent tax treatment across different asset classes.
The proposal's definition of a broker is broad, including trading platforms, payment processors, certain hosted wallets, etc. Decentralized exchanges were also included in the reporting requirements.
At the time, the Treasury Department explained that the key issue was not how the platforms operated, but ensuring that all digital asset transactions were reported, regardless of the platform.
Crypto industry critics quickly raised concerns about the potential impact on DeFi platforms like Uniswap, after the final draft, released in June 2024, exempted decentralized exchanges and self-custodial wallets from the reporting requirement.
