The IRS recently released a draft version of the long and highly anticipated Form 1099-DA, Digital Asset Proceeds From Broker Transactions. The form will be used for reporting proceeds from (and in some cases, basis for) digital asset dispositions to the IRS and recipients. The form treats digital assets such as cryptocurrency, similarly to stocks, with numerous fields showing items like the type of digital assets, amounts being reported, the number of units transacted, date of acquisition and disposition. total proceeds, cost/basis, backup withholding, and many others. The form itself has been in development for the last few years as the prevalence of digital assets continues to expand, and has been eagerly anticipated, despite the knowledge that the first run would just be a draft version of the form.
Despite the similarities in types of fields to forms for non-digital asset transfer reporting, the 1099-DA draft has some specific quirks relating to digital asset transfers that are important to note. One of these is the reference to distributed ledgers (such as a blockchain), which are generally found with digital assets including cryptocurrencies. Another notable difference is the addition of time references for the digital transactions, which are all recorded in Coordinated Universal Time (UTC) to keep all transactions on the same date/time schedule worldwide regardless of the actual physical location where the transfer was initiated.
This draft reflects the notice of proposed rulemaking that appeared in the Federal Register on August 29, 2023. Be aware, as this is an early draft, the form could be subject to changes and updates prior to the final release as well as the release of the instructions. Comments can be submitted to the IRS about this and other draft forms or publications at IRS.gov/forms-pubs/comment-on-tax-forms-and-publications. Draft forms are can be searched for at IRS.gov/draft-tax-forms.
To access the draft form, click here.
