IRS Unveils Proposed Crypto Tax Form
The US Internal Revenue Service (IRS) has recently introduced a draft version of a tax form designed to report cryptocurrency income. This form, known as Form 1099-DA or “Digital Asset Proceeds from Broker Transactions,” is currently awaiting feedback from various stakeholders before its final release by the IRS.
Cryptocurrency Reporting Rules Proposal
Back in August 2023, the US Treasury Department and IRS put forth a series of regulations that would require brokers and crypto exchanges to disclose specific digital asset transactions to ensure fairness in the financial sector. These rules were part of the broader 2021 Infrastructure Investment and Jobs Act aimed at enhancing transparency around client transactions for brokers. Now, the IRS is offering a sneak peek at the tax form designed to align with these rules.
- The draft Form 1099-DA defines brokers as kiosk operators, digital asset payment processors, hosted wallet providers, and unhosted wallet providers.
- This includes centralized and decentralized exchanges, noncustodial wallets, and Bitcoin ATMs.
- Traders will be required to provide various details like digital asset addresses, transaction IDs, units of digital assets, and the security status of each asset.
- The IRS anticipates rolling out Form 1099-DA by January 2025, with brokers set to issue it to traders starting from January 2026.
Challenges and Concerns with IRS Form
The IRS’s latest tax form may present challenges for taxpayers, including the potential exposure of previously unreported crypto transactions that could trigger tax-related investigations. Additional concerns surrounding Form 1099-DA encompass self-transfers, information sharing among digital asset brokers, and transactions involving foreign exchanges.
Community Backlash Against IRS Draft
The crypto community has voiced its opposition to several aspects of the new IRS Form 1099-DA. Ji Kim, the chief legal and policy officer of the Crypto Council for Innovation, criticized the inclusion of “unhosted wallet providers” in the definition of brokers. Kim highlighted the limited access of these wallet providers to transaction details and user identities.
In a separate statement, Shehan Chandrasekera, Head of Tax Strategy at CoinTracker.com, expressed concerns over the potential privacy and anonymity risks associated with the proposed tax form for the US crypto industry.
The draft Form 1099-DA is currently open for feedback, with possible revisions based on public comments.
Rising Crypto Market Cap
Currently, the total cryptocurrency market capitalization stands at $2.262 trillion according to the daily chart. This figure underscores the significant value and growth potential of the crypto market.
Hot Take: IRS Form 1099-DA Sparks Controversy
The introduction of the IRS Form 1099-DA has sparked controversy within the crypto community, with concerns raised about potential privacy violations and the impact on traders. As the IRS continues to refine its tax reporting requirements, it will be essential for traders and investors to stay informed and compliant with the evolving regulatory landscape.
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