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The United States Internal Revenue Service (IRS) has made significant updates to its crypto taxation form, 1099-DA, which is designed specifically for crypto brokerage accounts. This move is an important step in the overall strategy to organize and explain the procedure of reporting transactions relevant to a digital asset.
On August 9, Ji Kim, Head of Global Policy, Digital Assets, and General Counsel at the Crypto Council for Innovation, shared the news via X. Kim emphasized that the latest draft of the 1099-DA form, which has now been made available on the IRS website, is compatible with the final broker regulations that were released in June. This document is to be used to report cryptographic asset transactions to clients, and it will be obligatory starting from 2025.
🚨 An updated draft 1099-DA form just posted on the IRS website, which reflects the final broker regs issued in June. As a refresher, this is the form that “brokers” will start using in 2025 to report digital asset transactions to customers. https://t.co/NSSu8prl4X
Initial…
— Ji Kim (@_jikim) August 9, 2024Removal of Controversial Crypto Reporting Requirements
One of the most notable changes to the draft is eliminating several controversial reporting requirements. Brokerage companies were asked to include the wallet address, transaction ID, and asset acquisition time for all assets in the initial draft.
These requirements have sparked significant concern within the crypto community, particularly regarding privacy and security. The obligation to disclose wallet addresses and transaction IDs for every transaction was seen as a potential risk, as it could expose sensitive information to unauthorized parties.
Furthermore, the requirement to report the exact time of acquisition down to the second was criticized for being overly burdensome and likely to cause confusion among both taxpayers and the IRS. The updated draft form has eliminated these elements, now requiring only the date of acquisition, which is seen as a more practical and less intrusive approach.
The CCI, while still reviewing the updated form, has welcomed these changes. Kim emphasized that these revisions align with the advocacy efforts of the CCI and the broader crypto industry, which have been pushing for clearer and more precise reporting obligations that take into account the unique characteristics of digital assets.
Since the IRS is still perfecting its way of taxing crypto, a formal news release from the Treasury and IRS would be released. This can incorporate an open door for further public comments. However, the crypto industry forges ahead in the face of great danger constantly, realizing the need for support to prevent future restrictive rules that might be impractical and, at the same time, disregard the rights of privacy and data security in the digital asset area.
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