The U.S. Internal Revenue Service (IRS) has recently revealed an early draft of a new tax form dedicated to reporting cryptocurrency transactions. The form, known as 1099-DA, is part of the IRS's ongoing efforts to streamline the reporting process for digital assets within the federal tax code. The main objective of this initiative is to simplify and clarify the tax obligations arising from cryptocurrency transactions.

The 1099-DA form focuses on documenting taxable gains or losses resulting from the brokerage of digital assets. It includes detailed sections for reporting specific token codes, wallet addresses, and transaction information on the blockchain. This design ensures that all necessary information for tax assessment is accurately provided.

Key Features of the Proposed 1099-DA Form

The 1099-DA form resembles the standard 1099-B used for reporting stock and bond sales but is tailored to the unique features of digital currencies. As proposed, brokers will be responsible for reporting the proceeds and, in some cases, the basis of digital asset dispositions. This requirement implies that taxpayers must report any gains or losses from such transactions in their tax returns.

The draft form includes various checkboxes for specifying the type of broker reporting the data, such as kiosk operators, digital asset payment processors, and hosted wallet providers. This classification is essential for the IRS to distinguish between different market participants, which may have distinct reporting requirements.

Industry Responses and Regulatory Developments

The introduction of the draft form has sparked discussions among cryptocurrency businesses and tax professionals. The final regulations will determine which digital asset brokers must comply with the reporting requirements, a topic that industry stakeholders are closely monitoring.

There are also questions about whether wallet providers, decentralized platforms, and payment processors will fall under the regulatory scope.

Tax advisors and business owners have generally welcomed the draft as a positive step towards reducing uncertainty for investors and companies in the crypto space. However, they also anticipate further clarifications, particularly regarding the treatment of non-deductible losses and internal transactions that do not involve external asset transfers.

Public Consultation and Finalization

The IRS is currently accepting public feedback on the draft form, suggesting that the final version of the regulations and the form itself may undergo modifications based on the comments received.

The inclusion of wallet addresses and transaction hashes has been identified as a key area of interest, with the community eager to see how privacy and practicality concerns are addressed in the final rule.

Although the exact timeline for finalizing the rule remains uncertain, the presence of a 2025 date on the draft form indicates that the IRS aims to implement these changes relatively soon.