The IRS will introduce Form 1099-DA next year to streamline reporting of digital asset sales and exchanges—and the move could have far-reaching implications on crypto businesses and the broader industry. As a result, companies must start considering the impact and preparing to meet the new regulations now.
In this article, we’ll explore Form 1099-DA, who’s required to furnish the form, steps that businesses can take to prepare, and some of the criticisms and controversies following the IRS’ move to introduce it next year.
Czym jest formularz 1099-DA?
The IRS introduced Formularz 1099-DA for brokers to report certain sale and exchange transactions of digital assets beginning in the calendar year 2025. While taxpayers won’t have to deal with the form until 2026, businesses must report transactions made in 2025, meaning it’s essential to start laying the groundwork.
Form 1099-DA – Source: IRS
IRS Commissioner Danny Werfel emphasized the importance of the new form, saying that it will “provide more clarity for taxpayers and give them another tool to help them accurately report their digital assets transactions.” In addition, he said the form will “help us make sure digital assets are not used to hide taxable income.”
Who’s Required to Report?
The final regulations primarily apply to brokers who take possession of digital assets sold to their customers. For example, brokers operating custodial trading platforms, certain hosted wallet providers, digital asset kiosks, and certain processors of digital asset payments (PDAPs) are all subject to the new reporting requirements.
These requirements will phase in over time:
- From January 1, 2025: Brokers must report gross proceeds for transactions.
- From January 1, 2026: Brokers must report the cost basis on certain transactions.
- Od 1 stycznia 2026 r: Real estate professionals treated as brokers must report the fair market value of digital assets in real estate transactions.
Notably, the regulations allow for aggregate reporting of certain sales of stablecoins and niezniszczalne tokeny (NFTs) that exceed specific de minimis thresholds. A separate threshold applies to PDAP sales to avoid the need to report an excessive number of transactions if they are too small to matter.
Notably, the current regulations do not include reporting requirements for decentralized or non-custodial brokers that don’t take possession of the digital assets traded. The Treasury Department and IRS plan to address these entities in future regulations after significant industry pushback.
Compliance Strategies for Business
Crypto businesses affected by the new regulations should develop a robust compliance strategy to avoid any business disruptions or fines and penalties. In addition to custodial trading platforms requiring near-term changes, decentralized platforms may also want to start planning ahead to handle any potential upcoming regulations.
Some steps to consider include:
- Understand the Requirements. Review the IRS guidelines and seek professional advice from lawyers, accountants, or engineering teams if needed. The final regulations are available on the Rejestr federalny for anyone to view.
- Upgrade Your Systems. Invest in the software and systems you need to track and report the necessary information. In particular, you may need to develop a way to track the cost basis for each transaction made within your system and generate the Form 1099-DA to furnish to customers.
- Train Your Staff Members. Ensure relevant team members understand the new requirements and how to comply with them. For example, accounting teams may be additionally responsible for computing the cost basis for customers and making the necessary filings to the IRS.
- Communicate with Customers. Prepare to educate your customers about the new reporting requirements and how they might affect them. This might involve warning them that you’ll provide Form 1099-DA and updating guides and FAQs showing them where to find the new form.
- Review and Upgrade Policies. Examine your existing policies and procedures and update them to zapewnienia zgodności. For example, you may need to collect and verify more customer information to comply with the new rules.
Form 1099-DA Criticisms & Controversy
Despite the IRS’ intentions to clarify digital asset reporting, Form 1099-DA has faced significant criticism from industry experts. While the IRS has scaled back its initial definition of a broker to allow more time for thoughtful regulation, problems remain with the current state.
Główne punkty sporne obejmują:
- Tracking Cost Basis – For investors using multiple platforms and frequently transferring assets, accurately tracking podstawa kosztowa becomes challenging because exchanges don’t trade information like they do with equities.
- Reporting Burden – The potential for receiving multiple, possibly incorrect 1099-DA forms could lead to increased complexity for individual taxpayers and a higher likelihood of IRS audits backed by faulty data.
While the current regulations don’t apply to non-custodial brokers, there’s concern that future regulations could create more issues. Many decentralized platforms don’t collect customer information—and indeed, some cannot by design—which could force them to shut down if they were to be required to furnish Form 1099-DAs.
Wpływ na branżę kryptowalut
The introduction of Form 1099-DA could have far-reaching effects on the crypto industry.
Centralized exchanges may need to invest heavily in compliance infrastructure to meet the new reporting requirements. If they don’t already provide alternative Form 1099 details, they may need to build the capabilities to calculate cost basis for their customers. And even if they already use other 1099 forms, they’ll need to collect additional details.
While currently exempt, future regulations could pose existential challenges for zdecentralizowane finanse (DeFi) protocols. These businesses should start thinking about how to comply with future regulations to avoid being pushed into a corner when the Treasury and IRS propose rules affecting them.
The stringent reporting requirements could also stifle innovation in the crypto space, particularly for startups and smaller projects. For instance, the requirement to collect information from customers and make additional filings to the IRS could add significant costs, which may prove insurmountable to smaller companies without dedicated legal teams.
And finally, the new regulations are a significant blow for privacy advocates. The new reporting requirements require the collection of personally identifying information from customers. While this lifts the veil on potential tax evasion, it also provides the government with a wealth of data about transactions made by private citizens.
The Bottom Line – 2088
As the crypto industry continues to evolve, the introduction of Form 1099-DA represents a significant step toward standardizing reporting practices. But, while the form aims to clarify digital asset transactions, it also presents new challenges for businesses and investors, making it essential to start preparing now.
If you trade crypto assets, ZenLedger can help streamline tax reporting to comply with evolving IRS regulations. Our platform aggregates transactions across wallets and exchanges, computes your capital gains and losses, and generates the paperwork you must file each year. And you can also identify opportunities to save!
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