One of the top trade associations in the blockchain space, the Chamber of Digital Commerce, has provided input on the US Internal Revenue Service’s (IRS) proposed Form 1099-DA, which is meant to be used for reporting transactions involving digital assets. The thorough answer from the chamber emphasizes the necessity of streamlining the form so that brokers handling digital assets, like cryptocurrency, can utilize it with more ease. It also draws attention to privacy issues, such as asking for only the data required for taxpayers to disclose transactions involving digital assets.
The chamber criticized the draft form for requesting excessive information. It suggests that the final form only requires information necessary for basic tax reporting, while brokers should retain additional details for use during specific IRS examinations.
The form’s request for private data, including transaction IDs and digital asset addresses, also drew criticism from the blockchain advocacy group. It makes the case that such information might violate taxpayer privacy and ought to be gathered only in cases where there is probable criminal behavior.
The remark highlights the omission of specific broker instructions, which are implied to be necessary by the draft form.In order to guarantee that brokers can appropriately complete the form, the chamber recommends that the IRS publish the instructions for public review prior to finalizing it. Additionally, it proposed that brokers should be able to declare on the form whether a particular digital asset is subject to a different tax rate, such as non-fungible tokens that may be subject to a higher tax rate since they are considered collectibles. It claims that doing so would guarantee correct tax reporting and assist in preventing errors in IRS processing. On April 18, the IRS made the draft form available and requested feedback. The chamber’s contribution comes after its prior feedback on relevant proposed regulations that were filed in November 2023.
Form 1099-DA will be prepared by the brokers for each customer who trades or sells digital assets, according the draft form. Operators of kiosks, processors of payments for digital assets, providers of hosted and unhosted wallets, and other individuals are brokers. Once the suggested reporting criteria were made public, the cryptocurrency community expressed its opinions. The regulation, according to the Blockchain Association, involves “fundamental misunderstandings about the nature of decentralized technology and digital assets.”