Cryptocurrency ownership rates continue to increase: 40% of Americans now own crypto, up from 30% in 2023. And the IRS has noticed. Last month, they released a draft of Form 1099-DA – “Digital Asset Proceeds from Broker Transactions.” This will be the official tax form crypto owners and brokers will use to report digital asset transactions starting in 2025.

What does Form 1099-DA mean for cryptocurrency owners and brokers?

  • More straightforward tax filing: Form 1099-DA captures key data points like acquisition date, sale date, proceeds, and cost basis, all of which are essential for reporting crypto gains and losses accurately. 
  • More scrutiny for high earners: The IRS has made it clear that they want everyone to pay their fair share, especially high-income crypto investors. This form gives the agency a clearer picture of crypto activity.
  • Possible KYC (Know Your Customers) verification: The inclusion of “unhosted wallet provider” as a check box on the tax form suggests the IRS may require verification when using these wallets. This could significantly change how users interact with crypto platforms.

What should cryptocurrency owners do to prepare?

  • Stay informed: This is a developing situation. This draft form will likely undergo modifications, as the IRS is accepting feedback on the draft until June 21, 2024. So, keep an eye out for further updates from the IRS.
  • Maintain good records: As with all financial transactions, it’s critical to maintain good records of crypto transactions, including acquisition dates, costs, and sale details. 
  • Consult a tax expert: Crypto tax laws are complex. Consult a CPA with expertise in crypto taxation to ensure you’re filing correctly and taking advantage of all available deductions.

While the arrival of Form 1099-DA signifies a more standardized approach to crypto tax reporting, there are still uncertainties about the final reporting requirements. At Boris Benic and Associates, we’ll continue to monitor the situation and keep you informed.