On June 12, 2025, the IRS released Notice 2025-33, which modifies Notice 2024-56 and extends certain transitional relief to brokers of digital asset sales. Most notably, no backup withholding will be required on digital asset transactions in 2025 or 2026. Other relief is related to tax year 2027 reporting, is narrower, and applies only to certain payees. The notice provides the following relief:
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Backup withholding for TY26. The IRS has postponed the application of backup withholding to digital asset sales (under Sections 3406 and 3403) for an additional year. Backup withholding on digital asset sales is not required for transactions in 2025 or 2026.
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Calculating Backup Withholding for TY27. For tax year 2027 transactions that involve a sale of a digital asset for a different digital asset (other than an NFT), backup withholding will be limited to 24% of the amount the broker receives upon liquidation, not 24% of the value at the time of the transaction, even though it may be less than 24% of the digital assets the customer receives. Penalties will not be imposed for calculating and reporting backup withholding in this manner.
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Preexisting Customer’s Uncertified TINS for TY27. The IRS has provided an additional year for brokers to obtain certified TINs from preexisting customers. For tax year 2027 transactions, brokers may continue to rely on uncertified TINs for preexisting customers if, prior to effecting a digital asset transaction, the broker receives a match for the payee’s name and TIN in the IRS TIN matching service.
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Treatment as Exempt Foreign Persons for TY27. The IRS has provided additional time for brokers to obtain documentation from preexisting customers to treat them as exempt foreign persons. If a payee had an account with the broker before January 1, 2026, the payee has not previously been classified as a US person, and the address on file for the payee is outside of the US, the following relief applies:
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The IRS will not impose penalties for failure to file and failure to furnish 1099-DA for the payee for transactions effected in 2027.
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Backup withholding will not be required for these customers for digital asset transactions effected in 2027.
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Brokers will not face penalties for failure to file Form 945 for tax year 2027 if it is related to backup withholding for these payees.
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Notice 2025-33 extends the transitional relief from Notice 2024-56 by postponing backup withholding requirements on digital asset sales for an additional year through 2026. The notice also provides continued relief for brokers to use uncertified TINs and treat certain preexisting customers as exempt foreign persons for 2027 transactions. For 2027 digital asset-to-asset trades (excluding NFTs), the notice also maintains the modified backup withholding calculation that limits withholding to 24% of the amount received upon liquidation rather than 24% of the digital asset’s value at transaction time.
Notice 2025-33 can be found here.
