KEY POINTS


  • On Friday, the U.S. Department of the Treasury and the IRS unveiled draft rules for the tax reporting of digital assets like cryptocurrencies and non-fungible tokens.
  • Brokers would report transactions from 2025 starting in January 2026 using Form 1099-DA, similar to how financial institutions report investments like stocks and bonds.
  • In the interim, experts say it's more crucial than ever to accurately report and track your cryptocurrency activity.

Introducing a crypto reporting rule, the U.S. Department of the Treasury and IRS have released proposed regulations for crypto tax reporting. Experts advise investors on the investment implications and stress the importance of accurately reporting and tracking activity.
The agencies on Friday unveiled the long-awaited tax reporting proposal for cryptocurrencies, non-fungible tokens, and other digital assets, which is a result of the 2021 federal infrastructure bill. According to the Treasury, it's part of a larger initiative to "close the tax gap" and combat crypto tax evasion. The regulations would mandate that brokers start sending Form 1099-DA to investors and the IRS in January 2026 to report cryptocurrency activity starting in 2025, just like other tax forms. Notably, the proposal covers cryptocurrency payment processors, some decentralized and centralized exchanges, and specific online wallets.
crypto reporting rule Investment implications

The IRS postponed the reporting rule's implementation from its original 2024 start date until late December 2022 but made clear that investors must still report their crypto activity now, whether or not they have received a tax form.

On the front page of tax returns since 2019, there has been a yes-or-no question about cryptocurrency, and the agency has sought customer records by serving court orders on several exchanges.
Before issuing final regulations, the Treasury and IRS will allow for public comments.


Think about correcting previous tax returns.

According to CPA and tax attorney Andrew Gordon, president of Gordon Law Group, "it's more important than ever to report all of your crypto activities in the current year" with increased IRS scrutiny on the horizon.

He advised thinking about amending prior tax returns if you hadn't been reporting cryptocurrency because "the IRS is going to have a firehose of information about transactions."

According to CPA Alex Rosenberg, who specializes in digital assets, it is generally preferable to voluntarily disclose unreported income to the IRS before the agency discovers your error in order to avoid penalties and interest.

If there is $5 to $10 in unreported income, amending a return might not be necessary. But many people might be looking at six to seven figures in crypto activity that they haven't disclosed, he added.


"Believe, but double-check with your own records."

While Roytenberg acknowledged that Form 1099-DA "may reduce the burden of compliance" for some investors, it's crucial to keep track of all your cryptocurrency transactions.

Keeping all of your digital assets in one location may help to reduce discrepancies and missing data, he said. However, there is still a chance for reporting mistakes, particularly for transactions that take place outside of the blockchain network.

Trust, but double-check, Rotenberg advised. I don't anticipate that the 1099-DA will serve as a one-stop shop for all of the problems.