On April 23, 2004 we posted IRS Releases Digital Asset Draft Form 1099-DA where we discussed that the new 2025 Form 1099-DA is generally expected to be included on federal income tax returns by taxpayers who answer "yes" to the digital asset question that asks if they, at any time during the relevant tax year, received, sold, exchanged, or disposed of a digital asset or financial interest in a digital asset.
Now in IR-2024-178 dated June 28, 2024 The U.S. Department of the Treasury and the Internal Revenue Service issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law.
They require brokers to report certain sale and exchange transactions that take place beginning in calendar year 2025 and will be reported on the soon-to-be released Form 1099-DA. The regulations implement reporting requirements by the Infrastructure Investment and Jobs Act, enacted in 2021.
The final regulations require gross proceeds reports for transactions taking place on or after January 1, 2025 and basis reporting by some brokers for transactions beginning January 1, 2026,
Treasury and the IRS has issued two notices which generally provide relief from failure to file and failure to furnish penalties for 2025 transactions if the broker makes the good-faith effort to file (Notice 2024-56) and furnish accurate Forms 1099-DA, Digital Asset Proceeds from Broker Transactions in a timely manner (Notice 2024-56).
The notices contain backup withholding relief for 2025 and 2026 transactions.
The final regs also omit a finalized Form 1099-DA, the information return that will be used for reporting digital asset transactions. A draft was recently released and there will be a 30-day comment period focused on improving the form.
Also according to Law360, the Internal Revenue Service released a revised draft form on August 9, 2024 for brokers to report their digital asset sales, which reflects the treatment of custodial industry participants in final regulations and the transitional relief for filers that fail to report the transactions.
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