1099-DA: New IRS Form for Crypto and Digital Assets

1099-DA: New IRS Form for Crypto and Digital Assets

What Is 1099-DA?

Form 1099-DA is one of the newest IRS tax forms for reporting cryptocurrency and digital asset transactions. Digital asset trading platforms, payment processors, specific wallet providers, and brokers will be legally required to issue an annual Form 1099-DA to traders and investors.

Entitled “Digital Asset Proceeds From Broker Transaction,” 1099-DA forms will include information about exchanges and sales of digital assets occurring during a designated tax year.

Individuals receiving a 1099-DA must include this information when filing their federal tax returns.

The proposed rules also mandate real estate reporting entities (i.e., mortgage lenders and brokers) report any digital assets used by buyers in real estate transactions.

Additionally, these entities must reflect the fair market value of digital/crypto assets paid to sellers on Form 1099-S for real estate transactions.

How Is Form 1099-DA Different From Current Crypto Tax Forms?

Cryptocurrency and digital asset exchanges currently use 1099-Ks, 1099-MISCs, and 1099-Bs to report taxable transactions.

The proposed 1099-DA shares similarities with Form 1099-B, which requires brokers to report their name, address, taxpayer identification number (TIN), and the customer’s name.

However, 1099-DA features a box for an “explanation if no recipient TIN” when the recipient’s TIN is not provided. This is the first variation of a 1099 that contains such a box.

So far, the 1099-DA draft instructions and proposed regulations offer no guidance on how this additional box should be used.

Furthermore, 1099-DA expands to include real estate transactions paid for with cryptocurrency and digital assets. The form also asks for information about “wash sales,” which converts losses into tax losses to offset realized gains.

At the moment, wash sales do not apply to digital assets. Moreover, the 1099-DA proposal suggests that the IRS will view cryptocurrency and digital assets like stocks and securities.

When Will the IRS Release 1099-DA for Digital Assets Brokers to Issue to Investors?

Beginning January 1, 2025, the IRS will want digital assets and real estate brokers to issue 1099-DAs.

It is also important to note that the IRS will require crypto platforms to report transaction details to their users on Form 1099-DA without disclosing this information directly.

Who Will Receive Form 1099-DA for Crypto and Digital Assets?

The IRS states that the “proposed regulations involving 1099DA will require brokers, digital asset trading platforms, payment processors, and hosted wallet providers to report gross proceeds from digital asset sales/exchanges.”

In other words, anyone who sells and/or exchanges cryptocurrency or other digital assets after January 1, 2025 should expect to receive a 1099-DA.

What Does 1099-DA Report to the IRS?

Although the 1099-DA has not yet been finalized, the IRS will likely include the following information regarding individual or business crypto transactions:

  • Transaction amount(s)
  • Transaction dates
  • Account number
  • Fair market value of digital assets at time of transaction
  • Identification of the digital asset broker
  • Transaction type, such as “exchange,” “sell,” or “purchase”

Does the IRS Have a Draft of Form 1099-DA?

Yes, the IRS has published a draft of Form 1099-DA. You can view it at https://irs.gov/pub/irs-dft/f1099da–dft.pdf.

Feedback, including comments and concerns, can be submitted to the IRS about this draft by visiting their Comments on Tax Forms page at irs.gov/forms-pubs/comment-on-tax-forms-and-publications.

Will Crypto Tax Reporting Be Easier With 1099-DA?

Existing guidelines and forms for reporting digital asset transactions fail to provide the IRS with consistent and accurate information regarding cryptocurrency transactions.

Although crypto tax reporting with 1099-DAs will not necessarily be easier for those receiving 1099-DAs, it will make it easier for the IRS to detect when cryptocurrency transactions are not being reported on a return.

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