The Internal Revenue Service has posted an early draft of the updated Form 1099-DA, the form for brokers to report certain sale and exchange transactions of digital assets that take place beginning in 2025.
Comments about the draft can be left on the
Generally, these forms will be sent separately to taxpayers and the IRS in early 2026.
The new draft 1099-DA, “
“We know third-party reporting greatly improves compliance with the nation’s tax law,” said IRS Commissioner Danny Werfel, in a statement. “This step will also help us make sure digital assets are not used to hide taxable income, including in high-income categories, while providing taxpayers who play by the rules more information to accurately report their income.”
Jessalyn Dean, vice president of tax information reporting at Ledgible, a digital asset tax information and accounting platform, noted significant changes in this second draft, including removal of “the ambiguous free form box ‘Explanation if no recipient TIN’ ” and the box to indicate “Broker type.”
“Boxes 7a, 7b, and 8 from the first draft around non-cash proceeds are simplified into a single Box 7,” Dean added, “removing the need to indicate the type of non-cash proceeds received in the sale. Box 8 is repurposed for the broker to indicate that they relied on customer-provided information in preparing the Form 1099-DA, as expected from the final regulations. It is likely that IRS agents during examination would leverage this information in determining if the taxpayer is eligible for penalty relief.”
Among other changes:
- Boxes 11a and 11b are repurposed for aggregate reporting of qualifying stablecoins and specified non-fungible tokens, as expected from the final regulations.
- Box 11c is repurposed for the broker to indicate the amount of gross proceeds related to primary sales of NFTs, as expected from the final regulations. “This is so that the IRS and the taxpayer have a better sense of gross proceeds that are ordinary income from a trade or business rather than sales of capital assets,” Dean said.
- Certain boxes related to changes in the final regulations are removed, as expected, such as the time of acquisition, time of sale, digital asset address and sale transaction ID.
“Box 5 remains a mystery,” Dean said, “pending the broker instructions to the form.” And “Box 10 unfortunately remains, where the broker has to give a reason why a sale is non-covered for which cost basis is not reported. This goes beyond what is required on Form 1099-B reporting and the three options available are not comprehensive enough.”
“We are still waiting for the publishing of the instructions for the broker which is a critical component for implementation,” Dean said. “These instructions should also provide insights into areas of the final regulations that are ambiguous.”
The IRS posted the new draft of Form 1099-DA to IRS.gov along with the instructions for the recipients of the form. The agency expects to post the draft instructions for filers soon. Once the draft filer instructions have been posted, a notice will be published in the Federal Register to allow for a 30-day comment period.
“The pressure is now on the IRS to finalize Form 1099-DA and publish the accompanying broker instructions,” Dean said. “Brokers and their software providers need ample time to develop and test their systems to ensure compliance in time for reporting.”
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