The U.S. Internal Revenue Service (IRS) has introduced a new draft of the 1099-DA tax form, designed to simplify the reporting of digital asset transactions for the 2025 tax year. This updated form represents a significant improvement over the previous version released in April 2024.
Key Changes in the New Draft
The revised 1099-DA form eliminates the requirement for investors to report their wallet addresses and transaction IDs. This change addresses privacy concerns by removing the need to disclose sensitive information. Additionally, the form now requires only the transaction date, removing the need to report the exact time of each transaction. The update also means brokers no longer need to specify their type of brokerage, streamlining the reporting process.
IRS Directors’ Perspective
Raj Mukherjee and Seth Wilks, Directors of the IRS Office of Digital Asset Initiative, believe the new form will simplify compliance with complex digital asset regulations, making the process easier for taxpayers.
Industry Reactions
Crypto tax experts have welcomed the changes. Jessalyn Dean, Vice President of Tax Information Reporting at Ledgible, praised the new draft for being clearer and more user-friendly than the previous version.
However, some experts argue that further improvements are needed. Andrew Rossow, an attorney and CEO of AR Media Consulting, notes that while the draft addresses some privacy issues, it does not fully simplify the filing process. Rossow points out that the IRS’s focus has been on centralized exchanges, potentially neglecting the decentralized finance (DeFi) ecosystem, which operates under different rules.
Future Developments
The new 1099-DA draft follows recent IRS guidelines for reporting virtual currency transactions and hints at future considerations for decentralized and self-custodied brokerage businesses. Although not finalised, the form is expected to be used for the 2025 tax year.
The IRS's updated approach reflects a move towards increased transparency and simplified reporting for digital assets. While the new draft represents progress, ongoing adjustments may be needed to keep pace with the evolving crypto industry and support innovation in decentralized financial systems. The IRS is currently seeking public feedback, which will shape the final version of the 1099-DA form.
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