A new draft tax return from the Internal Revenue Service (IRS) proposes tracking certain virtual currency transactions.
The draft law regarding digital asset income from brokered transactions indicates that taxpayers will be required to fill out Form 1099-DA, which collects trader identification information and detailed transaction data from virtual currency “brokers.”
According to Shehan Chandrasekera, crypto accountant and tax director at CoinTracker, this form could be: lead Toward the End of Privacy for U.S. Cryptocurrency Traders.
“Brokers (centralized financial exchanges, certain decentralized financial exchanges, wallets) 1713805199 Starting January 1, 2025, you will need to generate this form for each sales transaction and submit that information to the IRS and to you (as well as your stock broker).
This form collects amazing data points such as the acquisition date, sale date, revenue, and cost basis of the crypto asset sold. This information is necessary and helpful for taxpayers to complete their cryptocurrency tax returns.
However, collecting the following additional data points (particularly wallet addresses) at scale and reporting them to the IRS can raise significant privacy and security concerns: ”
Chandrasekera continues: include Despite feedback from industry advocates, the IRS plans to include non-hosted wallets in the definition of “broker,” as the form states “non-hosted wallet providers.”
Tax and cryptocurrency law firm Gordon Law is also examining Form 1099-DA to understand what types of entities fall under the IRS definition of an intermediary. The company said centralized exchanges, decentralized exchanges, wallets where users can buy and sell cryptocurrencies, Bitcoin ATMs, and other physical kiosks are classified as brokers.
Gordon Law also said that while the crypto community may push back against the new form of counting decentralized exchanges (DEXs) as brokers, the IRS is unlikely to be flexible.
“Currently, DEXs do not collect tax information about their customers, but the IRS will likely claim that it is in fact “in a position to know” the users’ identities and will enforce know-your-customer (KYC) requirements. . ”
According to the Gordon Law, the IRS proposal does not include miners, node operators, hardware wallets, software developers, or smart contract developers as brokers.
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