In IR-2025-67 dated June 12, 2025 The U.S. Department of the Treasury and the Internal Revenue Service extended and modified the transition relief provided in Notice 2024-56 PDF for brokers who are required to file Form 1099-DA, Digital Asset Proceeds From Broker Transactions PDF to report certain digital asset sale and exchange transactions by customers.
Transition relief for brokers required to file Forms 1099-DA
In 2024, Treasury and IRS announced final regulations requiring brokers to report digital asset sale and exchange transactions on Form 1099-DA, furnish payee statements, and backup withhold on certain transactions beginning January 1, 2025. At the same time, the IRS announced in Notice 2024-56 transition relief from penalties related to information reporting and backup withholding tax liability required by these final regulations for transactions effected during 2025. Additionally, Notice 2024-56 also provided limited transition relief from backup withholding tax liability for transactions effected in 2026.
The IRS received and carefully considered comments from the him the transition relief provided in Notice 2024-56 indicating that brokers needed more time to comply with the reporting requirements; today’s notice addresses those comments.
Additional transition relief
Notice 2025-33 extends the transition relief from backup withholding tax liability and associated penalties for any broker that fails to withhold and pay the backup withholding tax for any digital asset sale or exchange transaction effected during calendar year 2026.
The notice also extends the limited transition relief from backup withholding tax liability for an additional year. Specifically, brokers will not be required to backup withhold for any digital asset sale or exchange transactions effected in 2027 for a customer (payee), if the broker submits that payee’s name and tax identification number (TIN) to the IRS’s TIN Matching Program and receives a response that the name and TIN combination matches IRS records. Additionally, relief is provided to brokers that fail to withhold and pay the full backup withholding tax due, if the failure is due to a decrease in the value of withheld digital assets in a sale of digital assets in return for different digital assets in 2027, and the broker immediately liquidates the withheld digital assets for cash.
This notice also provides additional transition relief for brokers for sales of digital assets effected during calendar year 2027 for certain customers that have not been previously classified by the broker as U.S. persons.
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