A new draft tax form from the Internal Revenue Service (IRS) proposes tracking specific crypto transactions.
The draft of the Digital Asset Proceeds From Broker Transactions indicates that taxpayers must complete Form 1099-DA, which collects trader identification and detailed transaction data from crypto “brokers.”
According to Shehan Chandrasekera, a crypto accountant and head of tax at CoinTracker, the form could pipe to the end of privacy for crypto traders in the US.
“Brokers (centralized financial exchanges, certain decentralized financial exchanges and wallets) will 1713805958 are required to generate this form for each sales transaction and submit that information to the IRS and to you (similar to stock brokers) beginning 1/1/2025.
The form records non-surprising data points such as the date of purchase, date of sale, yield, and cost basis of crypto assets sold. This information is necessary and useful for the taxpayer to complete their crypto tax return.
However, collecting and reporting the following additional data points (especially wallet addresses) to the IRS on a large scale could lead to major privacy and security concerns.”
Chandrasekera further says that included “non-hosted wallet provider” on the form, the IRS plans to include non-hosted wallets under the definition of “broker,” despite feedback from industry advocates.
Tax and crypto law firm Gordon Law is also examining Form 1099-DA to figure out what type of entities would fall under the IRS’s broker definition. According to the company, centralized exchanges, decentralized exchanges, wallets that allow users to buy and sell crypto, Bitcoin ATMs and other physical kiosks would be categorized as brokers.
Gordon Law also says that while the crypto community may push back against the new format that treats decentralized exchanges (DEXs) as brokers, the IRS is unlikely to be flexible.
“DEXs do not currently collect tax information on their customers, but the IRS will likely argue that they are in fact “in a position to know the identity of users” and will enforce Know Your Customer (KYC) requirements.
According to Gordon Law, the IRS proposal does not include miners, node operators, hardware wallets, software developers and smart contract developers as brokers.
Don’t miss a beat – Subscribe to receive email alerts straight to your inbox
Check price action
follow us on TweetFacebook and Telegram
Surf to the Daily Hodl mix
Generated image: Midjourney