IRS Simplifies Crypto Tax Reporting, Removes Wallet Address Requirement
The U.S. tax authorities have introduced a revised form aimed at simplifying the tax process for crypto investors. The draft 1099-DA form, released on Friday, is designed to provide more “ease and clarity” for crypto taxpayers with digital assets, according to an IRS statement.
The updated 1099-DA released on Friday is more streamlined than the initial draft presented by the IRS in April. This new version of the form removes several requirements from its previous iteration, such as questions that many in the crypto community found intrusive. It eliminates the requirement for investors to provide their wallet addresses and transaction IDs, which had previously raised significant privacy concerns. Also, the form no longer requires the specific time of transactions, only the date.
Additionally, crypto brokers no longer need to specify their type of brokerage on the form. While these changes address some privacy concerns, Andrew Rossow, CEO and attorney at AR Media Consulting, told Decrypt that there is more the U.S. tax authorities can do to make the filing process simpler for investors.
Rossow points out that the focus of the IRS on centralized exchanges, like Coinbase and Kraken, neglects the growing DeFi ecosystem, which operates under different principles. This could potentially stifle innovation and create an uneven playing field in the industry. He also expressed concerns about the increased risk of data breaches and identity theft due to the government’s expanding access to financial data.
The draft of the 1099-DA was first unveiled in April 2024, and the public has 30 days to provide feedback on the latest version. The final release date of the form is still uncertain, but it is expected to be used for the 2025 tax year.
