A new draft tax form by the Internal Revenue Service (IRS) is proposing tracking specific crypto transactions.
The Digital Asset Proceeds From Broker Transactions draft indicates that taxpayers must fill out Form 1099-DA, which collects trader identification and detailed transaction data from crypto “brokers.”
[adinserter block="1"]According to Shehan Chandrasekera, a crypto accountant and the head of tax at CoinTracker, the form could lead to the end of privacy for crypto traders in the US.
“Brokers (centralized finance exchanges, certain decentralized finance exchanges, and wallets) will [now] be required to generate this form for each sale transaction and submit that info to the IRS and you (similar to stock brokers) starting 1/1/2025.
The Form captures unsurprising data points such as date acquired, date sold, proceeds, and cost basis of crypto assets sold. This information is needed and helpful for the taxpayer to complete their crypto tax filings.
However, the collection and reporting of the following additional data points (especially wallet addresses) to the IRS at scale could lead to major privacy and security concerns.”
Chandrasekera goes on to say that by including “unhosted wallet provider” on the form, the IRS plans to put unhosted wallets under the “broker” definition despite feedback from industry proponents.
Tax and crypto law firm Gordon Law is also examining Form 1099-DA to figure out what type of entities would fall under the broker definition of the IRS. According to the firm, centralized exchanges, decentralized exchanges, wallets that enable users to buy and sell crypto, Bitcoin ATMs and other physical kiosks would be categorized as brokers.
Gordon Law also says that although the crypto community may push back against the new form that counts decentralized exchanges (DEXes) as brokers, the IRS is unlikely to be flexible.
“DEXes do not currently collect tax information about their customers, but the IRS is likely to argue that they are, in fact, ‘in a position to know’ users’ identities and will enforce Know Your Customer (KYC) requirements.”
The IRS’s proposal does not include miners, node operators, hardware wallets, software developers and smart contract developers as brokers, according to Gordon Law.
Follow us on X, Facebook and TelegramDon't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any assets including cryptocurrencies, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Generated Image: Midjourney
