As the IRS continues to define how crypto should be regulated, the new 1099-DA (digital assets) form should provide more guidance for investors.
In the past, crypto exchanges and trading platforms have provided individual investors with their tax information through various 1099 forms (1099-MISC, 1099-B, etc.) These forms aren’t tailored to the complexities of crypto and are usually missing key information.
Form 1099-DA is expected to provide a solution so taxpayers can more easily report their crypto.
Here’s what we know so far about the 1099-DA.
What Is Form 1099-DA?
Cryptocurrency is one of the world’s fastest-growing industries, but no tax form is currently dedicated to reporting annual crypto gains and losses. The 1099-DA is expected to fill that void while also providing more guidelines on how taxpayers can expect crypto to be regulated.
It may replace the 1099-B form and other 1099 forms that some cryptocurrency exchanges currently send their customers.
The draft of this groundbreaking tax form has not been released to the public yet. Form 1099-DA is expected to collect information such as:
- purchase date
- date sold
- asset type
- gross profit
- cost basis
This would allow taxpayers to easily report their gains and losses from cryptocurrency and NFTs. Currently, calculating your crypto taxes can require a lot of work.
Why Is Form 1099-DA Being Created?
In 2021, President Biden signed the Infrastructure Act into law. The law categorizes crypto exchanges and trading platforms as “brokers,” meaning they are now required to report customer gains and losses to the IRS annually . Originally, this reporting was supposed to begin in 2023, but the deadline has been extended due to logistical hurdles.
Since there is currently no form dedicated specifically to digital assets, this is where tax experts believe the 1099-DA comes into play. Its expected goal is to make crypto reporting more straightforward.
When Will Form 1099-DA Be Released?
The IRS has hinted that new crypto reporting requirements will take effect for the 2026 tax year, in which case Form 1099-DA would be sent out in 2027.
Wondering why it’s taking so long? In order to follow the new broker requirements, cryptocurrency exchanges must make many important changes to the way they operate. This includes following Know-Your-Customer (KYC) protocols, changing the way they handle their assets, enabling the transfer of cost basis between different exchanges, and more.
Will Form 1099-DA Contain Everything You Need to File Your Crypto Taxes?
Unless you only use centralized crypto exchanges, it’s unlikely that Form 1099-DA will contain all the information you need to calculate your capital gains.
Offshore exchanges that don’t serve US customers will not be required to issue Form 1099-DA. It’s also unclear how much reporting crypto wallets will need to do. This means that when you transfer crypto between different wallets and exchanges, the 1099-DA could have some missing or incorrect information.
How To Prepare for IRS Form 1099-DA
With a limited amount of information released regarding IRS Form 1099-DA, it’s difficult to know how this form will differ from other 1099 forms. Form 1099-DA is not expected to be released until 2024.
The best way to be prepared is to be sure you’re keeping track of your crypto transactions from up to 6 years prior. Although it’s unclear how far back the 1099-DA form will go, it’s always best to have this information in a safe place.
Since crypto taxes can be a hassle, we highly recommend consulting with a tax attorney to help guide you through the process and make sure all the required information is intact.
We’ve helped thousands of clients avoid trouble with the IRS. Don’t wait until the new form is released; schedule a consultation with one of our attorneys today and find out how to prepare!
