On April 18, the IRS released a draft version of Form 1099-DA, the form that will be used to report digital asset proceeds from broker transactions—the first IRS form designed for this purpose. This form, along with proposed regulations on cryptocurrency brokers, signifies a substantial change in the information the IRS receives and expects taxpayers to report on cryptocurrency transactions.
Previously, it was entirely the responsibility of the taxpayer to report any digital asset sales. Taxpayers were required to report all their gains and losses from digital asset sales, but there was no standardized IRS form for reporting. The new form and proposed regulations would shift the reporting burden to the brokers. Brokers, including digital asset trading platforms, digital asset payment processors, and certain digital asset hosted wallets, will be required to issue a Form 1099-DA for each sale transaction on or after January 1, 2025.
The proposed form reports the following information, among other things:
- Name and type of broker
- Type of digital asset and quantity sold
- Date and time digital asset was acquired and sold
- Proceeds from sale of the digital asset
- Cost basis of the digital asset sold
The new reporting could have a significant impact on all taxpayers who hold digital assets. Taxpayers should make sure they have accurate basis information to ensure the taxable gain or loss on the transaction is correctly reported, especially if they have held their investments for a long period of time or if they have moved their digital assets between exchanges or wallets. Many exchanges do not have the original cost information, so maintaining those records is critical.
It’s important to note that the Form 1099-DA previewed by the IRS is still at the draft stage and the final version of the form will likely include changes when it’s officially released to the public. We will continue to monitor the evolution of this significant new reporting document and provide updates as the IRS makes future drafts available. If you have questions about how the new Form 1099-DA may affect you or your business, ARB’s tax team can help. Contact us today.
Dalton Myers joined ARB as an intern in 2016 and became a manager in 2022. He specializes in providing tax services to auto dealerships, individuals, and private client service.
