By 2026, the IRS hopes to roll out their new form 1099-DA to address tax evasion in the rapidly growing crypto industry

Key takeaways and what we know so far:

Purpose of 1099-DA: Designed to report income or capital gains and losses from digital assets.

All borkers will be required to report to the IRS. Who is a broker?

• Centralized exchanges (e.g., Coinbase).

• Decentralized exchanges (e.g., Uniswap).

• Wallets facilitating trade (e.g., Metamask).

• Bitcoin ATMs and similar kiosks.

Notably, miners, hardware wallets, software developers, and certain smart contract developers are exempt.

What will be reported: Reports on acquisition date, cost basis, sale/disposition date, sales proceeds, and gross proceeds for digital assets. Effective for sales post-January 1, 2025. This is more information than what we normally see on 1099-Misc and 1099-K forms.

Challenges of the form: Information sharing between brokers, potential misclassification of self-transfers, offshore exchange reporting, and gross proceeds reporting might pose issues.

Preparation: Potential brokers should consult with a crypto tax professional to ensure compliance. Noncompliance could lead to penalties.

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