IRS releases draft form for reporting certain cryptocurrency transactions
The Internal Revenue Service (IRS) has released an initial draft of tax forms that will allow brokers and exchanges to report certain sales of digital assets, providing insight into how the IRS classifies brokers.
Form 1099-DA draft The IRS, published Thursday, lists broker types including kiosk operators, digital asset payment processors, hosted wallet providers and non-hosted wallet providers. The form also asks for the “digital asset address” and whether the asset is a “non-covered security.”
The form comes from: rule Last year, it was suggested that cryptocurrency brokers would be treated similarly to brokers for more traditional investments such as stocks and bonds. Currently, taxpayers must pay tax on profits and can deduct losses when selling digital assets, but the Treasury Department has said it is difficult for taxpayers to calculate such gains.
The proposed rule is part of the Infrastructure Investment and Jobs Act passed in 2021. Cryptography language has been included to increase brokers’ reporting of their customers’ crypto activity.
Impact of Proposed Rule
Ji Kim, Chief Legal and Policy Officer at the Crypto Council for Innovation, said: Posted in On Friday it said it was “unfortunate” that the non-hosted wallet provider was listed as a broker.
“This fails to recognize that, among other things, the wallet provider, which is a software technology provider, has no knowledge of the nature of the transactions processed or the identity of the parties involved in the transactions.” said Kim.
Once the rules are finalized, digital asset brokers will issue forms to investors each year, according to the April 9 letter. post From the law firm Gordon Law Group. Brokers include centralized and decentralized exchanges, wallets that allow users to trade digital assets, and Bitcoin ATMs.
“The cryptocurrency community will likely push back against requiring decentralized exchanges (DEXs) to report to the IRS, but we do not expect the IRS to be flexible on this requirement. DEXes do not currently collect tax information about their customers, but the IRS Gordon Law Group claimed in its post that it is in fact “in a position to know” the identity of its users and said it would enforce know-your-customer (KYC) requirements.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.
