By 2026, the IRS hopes to roll out their new form 1099-DA to address tax evasion in the rapidly growing crypto industry
Key takeaways and what we know so far:
Purpose of 1099-DA: Designed to report income or capital gains and losses from digital assets.
All borkers will be required to report to the IRS. Who is a broker?
- Centralized exchanges (e.g., Coinbase).
- Decentralized exchanges (e.g., Uniswap).
- Wallets facilitating trade (e.g., Metamask).
- Bitcoin ATMs and similar kiosks.
Notably, miners, hardware wallets, software developers, and certain smart contract developers are exempt.
What will be reported: Reports on acquisition date, cost basis, sale/disposition date, sales proceeds, and gross proceeds for digital assets. Effective for sales post-January 1, 2025. This is more information than what we normally see on 1099-Misc and 1099-K forms.
Challenges of the form: Information sharing between brokers, potential misclassification of self-transfers, offshore exchange reporting, and gross proceeds reporting might pose issues.
Preparation: Potential brokers should consult with a crypto tax professional to ensure compliance. Noncompliance could lead to penalties.
Disclaimer: The information provided pertains to the United States. Information contained in this post and in the comments is intended for general informational and educational purposes and does not constitute legal advice. Reading this post, reading the comments, receiving a reply to your comment, or sending a direct message to this account does not create an attorney-client relationship. Contact an attorney for legal advice regarding your specific situation.
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