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Learn about the IRS’s new Form 1099-DA and the changes to digital asset reporting for the 2025 tax season. Discover what brokers and taxpayers need to know to ensure compliance with the updated regulations, including new reporting requirements and tips for a smooth filing process.
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In December 2024, the IRS released the final draft of Form 1099-DA, marking a significant change in how digital assets, such as cryptocurrencies, will be reported on your 2025 tax return. These new regulations, detailed in IRS Notice 10000 and set to go into effect on January 1, 2025, will impact anyone involved in digital asset transactions, including brokers, custodians, and taxpayers.
As the digital asset industry continues to grow, the IRS aims to ensure proper information reporting and tax compliance in a space where transactions often happen at lightning speed and with little regulatory oversight. Here’s what you need to know about the changes and how you can prepare for the 2025 filing season.
One of the major changes in the updated IRS regulations is the broad definition of "brokers." Previously, custodial brokers, such as exchanges and other facilitators of digital asset transactions, were required to report certain information, but the rules were somewhat vague. Under the new regulations, however, any party facilitating a digital asset transaction may now be considered a broker. This includes a wide range of intermediaries such as exchanges, wallet providers, and certain types of software platforms.
For example, if you’ve used a popular exchange like Coinbase or Binance to buy and sell Bitcoin or Ethereum, these platforms will now be required to report those transactions to the IRS. In the past, you might have only received tax forms from your primary exchange or wallet provider. Under the new rules, multiple entities may send you Form 1099-DA if they were involved in different parts of a transaction.
This expanded definition could create duplicative or conflicting reports for the same transaction.
✅ For example, if multiple parties are involved in a single transaction, they may each issue a Form 1099-DA for that transaction, potentially reporting conflicting information. This could result in confusion for taxpayers attempting to reconcile their digital asset holdings and transactions come tax season.
In a move to address long-standing concerns within the digital asset industry, the IRS has introduced a requirement for the inclusion of a unique nine-digit code issued by the Digital Token Identification Foundation (DTIF) for each reported digital asset. The DTIF, a U.K.-based foundation, is working to create a standardized industry identifier for digital tokens. However, this is a new initiative, and the DTIF code is not yet universally adopted like the CUSIP number, which is used for traditional securities.
This development raises concerns about the implementation of this code in practice. Digital assets often do not have a universal naming convention, and many assets may share the same name or ticker symbol, causing confusion for both taxpayers and their brokers. For instance, “Bitcoin Cash” and “Bitcoin” share similar names but are distinct assets, and using the same ticker symbol or name could make it harder for taxpayers to differentiate between the two.
While the cryptocurrency industry prides itself on technological innovation, the IRS, unfortunately, has not kept pace with the digital world. Under the new regulations, the IRS requires that Form 1099-DA be mailed to the last known address of the taxpayer—no digital alternatives are currently available. This creates a problem in an industry where electronic communication is the norm, and many customers may not have a physical address on file with their custodians or brokers.
For custodial brokers, this means that they will need to have the systems in place to send physical mail to all recipients of Form 1099-DA, even if they have previously communicated with those recipients digitally. This could be an administrative headache for companies that are not set up to manage paper mailings, particularly if they don’t have accurate or up-to-date address records for their customers.
💡 Tip for Brokers: Ensure your customer database is up-to-date with the latest addresses. Regularly prompt your users to verify or update their mailing addresses to avoid delays when sending Form 1099-DA.
The finalization of Form 1099-DA is a significant milestone in the effort to bring more oversight and regulation to the digital asset industry. However, the implementation of these new rules will take time, and there are still many outstanding questions about how certain provisions will be enforced. The IRS will likely continue to refine these regulations, and additional guidance may be issued in the coming months as the digital asset industry grapples with these changes.
For businesses operating in the digital asset space, now is the time to ensure that your compliance infrastructure is in place. This includes training employees on the new reporting requirements, ensuring all digital assets are registered with the DTIF, and making sure that systems are in place to send Form 1099-DA to recipients in a timely manner. By taking proactive steps now, companies can avoid potential penalties and ensure that they are fully prepared for the January 2025 reporting deadline.
💡 Tip for Taxpayers: Keep a record of all digital asset transactions, including the exchange platform and wallet you use. This will help you track your investments and assist your tax professional in reconciling the reports you receive from multiple brokers.
For taxpayers, the new Form 1099-DA reporting requirements may seem complex at first, especially with the inclusion of the DTIF code and the potential for multiple reports for the same transaction. However, staying on top of these changes and working with a tax professional will help ensure that you comply with the new regulations and avoid any penalties.
✅ Example: Suppose you transferred some Bitcoin from one wallet to another, and each service provider involved in the transaction sends a Form 1099-DA. By keeping detailed records of each transaction, including the date, amount, and type of digital asset, you’ll have an easier time reconciling multiple forms from different brokers and platforms.
It’s also important to keep in mind that the IRS is still refining its approach to the digital asset space, so there may be updates or further clarifications in the future. Staying informed about these changes and understanding how they impact your tax filing obligations will be key to successfully navigating the 2025 tax season.
The IRS's release of Form 1099-DA marks a significant step forward in regulating the digital asset industry. As the industry continues to grow, these new reporting requirements will provide the IRS with valuable insights into digital asset transactions and help ensure that tax compliance is upheld. However, these changes also bring challenges for both industry participants and taxpayers, with the potential for duplicative reports, confusion over token identification, and the logistical hurdle of mailing paper forms.
By taking action now to understand and implement these new rules, digital asset businesses can ensure smooth compliance as the new year begins. Taxpayers, meanwhile, should work closely with their tax professionals to ensure they are prepared for the reporting requirements and avoid any complications when filing their 2025 tax returns. With proper preparation, the transition to the new reporting framework can be seamless, allowing all parties involved to comply with the IRS’s evolving regulations.
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This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.
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