Increased IRS Tracking of Cryptocurrency: Form 1099-DA
By: Elise Norotsky
Beginning January 1, 2025, cryptocurrency will have its first form of standardized reporting, the form 1099-DA, Digital Asset Proceeds From Broker Transactions.[1] The form reports gross proceeds and gain, loss and cost-basis information and is filed by brokers dealing with digital assets, such as Coinbase, Kraken, or Gemini.[2] Prior to its enactment, the lack of standardized reporting made the realm difficult to efficiently audit, and thus regulate. This significant shift in how digital assets like cryptocurrencies and NFTs are taxed aligns digital asset reporting with traditional financial and tax reporting practices.[3] While it makes certain aspects easier for investors, taxpayers with digital assets should expect an uptick in audits and investigations in addition to complexities introduced by new rules for computing gains and losses, determining cost basis, and applying backup withholding.[4] Additional problems arise for those holding previously unreported crypto, foreign exchanges, and real estate transactions involving digital assets.[5]