IRS’s New Crypto Tax Form: Less Privacy Concerns, More Clarity

• IRS updates Form 1099-DA draft, easing reporting for digital assets starting in 2025.
• The new draft removes wallet address transaction IDs to enhance privacy and simplify reporting.
• A 30-day comment period opens for public input on the updated draft to modify the final version.

The Internal Revenue Service (IRS) has released an updated draft of Form 1099-DA, a key development for brokers reporting the sale and exchange of digital assets starting in 2025. This early release invites comments and feedback to refine the form before it is officially implemented.

IRS Commissioner Danny Werfel emphasized that the new Form 1099-DA enhances transparency and compliance within the digital asset space. Werfel stated that:

“This new form will provide more clarity for taxpayers and give them another tool to help them accurately report their digital assets transactions,”

Werfel also highlighted the role of third-party reporting in improving adherence to tax laws and preventing tax evasion, mainly in high-income categories. Significant changes have been made in the draft form to simplify reporting and reduce the risk of privacy breaches. Notably, the requirement to report wallet addresses and transaction IDs has been removed.

These elements posed a significant privacy concern as they could potentially expose sensitive information to unauthorized parties. The updated draft also shifts from reporting the exact time assets were acquired to only the date, alleviating burdens on the IRS and taxpayers by simplifying the reporting process.

The crypto industry has responded positively to the updates, with Ji Kim noting the removal of specific data points that had raised privacy and operational concerns in previous drafts. The Crypto Council for Innovation, among other industry stakeholders, views these changes as beneficial, reflecting ongoing advocacy efforts for practical and privacy-respecting regulations in digital asset reporting.

Additionally, the IRS has opened a 30-day comment period following the release of the draft filer instructions, allowing for further industry and public input. This process is part of the broader IRS efforts to adapt its practices to the complexities introduced by digital assets and to ensure comprehensive tax compliance.

This period of public comment will be crucial for finalizing the form that balances regulatory requirements with operational practicality. This will ensure that the final version of Form 1099-DA effectively meets the needs of all investors involved.