According to Law360, brokers of digital assets would face tax reporting requirements similar to those for brokers of securities and other financial instruments under the first-ever proposed rules governing assets such as cryptocurrency and nonfungible tokens, released Friday by the Internal Revenue Service.
Digital asset brokers would need to file information returns and payee statements on the sale of the assets for customers in certain transactions under Internal Revenue Code Section 6045, according to the . These brokers include trading platforms, payment processors, wallet providers and individuals who offer to redeem assets that were created or issued by that individual.
The Rules Would Begin Applying In 2026
For Transactions From The Previous Year.
By completing a new form called Form 1099-DA, brokers can assist taxpayers in assessing their tax obligations and avoiding complicated calculations or pay digital asset tax preparation services to file tax returns, according to the IRS. The 282-page proposal also recommended that brokers in certain circumstances include gain or loss and basis information for sales that take place on or after Jan. 1, 2026, so that customers have the information they need to prepare their tax returns.
The proposed rules are in line with tax reporting regulations on other types of assets to avoid preferential treatment, and they are part of broader enforcement on wealthy taxpayers seeking to circumvent tax rules and payments, Internal Revenue Commissioner Daniel Werfel said in a statement.
"We Need To Make Sure Digital Assets Are Not Used To Hide Taxable Income, And The Proposed Regulations Are Designed
To Provide A Clearer Line Of Sight Into Activities By High-Income People As Well As Others Using Them," Werfel Said.
The rules implement a provision of the Infrastructure Investment and Jobs Act, enacted in 2021, that called for on digital asset brokers. In a July , the IRSclarified that a cryptocurrency holder who earned additional tokens or coins from validating transactions in a blockchain or crypto exchange, a process called staking, should report the value of those rewards as part of gross income. The guidance speaks to a pending in the Sixth Circuit against the agency's treatment of a couple's income earned from staking activities.
Much of the digital asset reporting provision in the 2021 law is drawn from the Organization for Economic Cooperation and Development's crypto-asset reporting that members approved in 2022 to address the rapid adoption of such assets that can be transferred and held without banks and other traditional financial intermediaries.
Real estate brokers, mortgage lenders, title companies and closing attorneys would also need to disclose in their tax returns transactions that use digital assets to purchase real estate, as well as supply payee statements on the assets' fair market value from the sellers, according to the proposal.
Who Needs to Submit Form 1099-DA?
What Will Be Reported on Form 1099-DA?
Although the U.S. Department of the Treasury acknowledged that nonfungible tokens are different from other digital assets such as cryptocuWill wrap this thing up and saidrrencies, the proposal ultimately deemed that transactions that use NFTs are subject to the additional reporting requirements. Back in March, the IRS that it plans to float guidance treating NFTs as collectibles under IRC Section 408(m).
NFTs, which may represent artwork, antiques, music, films, fashion design and other entertainment memorabilia, are bought, sold and traded on digital asset trading platforms similar to other digital assets, and such transactions will trigger a gain or loss, the proposal said.
"The Reporting Of Gross Proceeds And Basis Information
Is Equally Useful To Taxpayers And The IRS As
Reporting On Other Digital Assets," The Proposal Said.
The inclusion of NFTs in the proposed rules may be concerning for stakeholders because there has not been a lot of IRS guidance on the matter, according to Joshua Smeltzer, partner at Gray Reed.
Have An IRS Tax Problem?