The IRS, or the U.S. Internal Revenue Service, has unveiled a new draft version of the 1099-DA tax form, which crypto brokers and investors use to report certain digital asset transactions for the upcoming tax period in 2025. The new version is a significant step forward from the original draft that was unveiled in April 2024.

The new draft regulations will be available on the IRS website for the next 30 days. There are issues that have been resolved with the amendment to that final rule. But experts believe the IRS could gain a better understanding of the issues for the benefit of crypto investors everywhere.

Key changes in the updated IRS 1099-DA form:

– Removing the requirement for investors to disclose their wallet address and transaction ID, a privacy concern
– Eliminate the requirement to record the time transactions occurred, only the date is required
– Brokers do not have to indicate on the form what type of mediation they are involved in

“The new Form 1099-DA will help taxpayers navigate the complex world of digital assets,” Raj Mukherjee and Seth Wilks, directors of the IRS Office of Digital Asset Initiative, said in an email.

What they say

Crypto tax experts praised the revised Form 1099-DA as a vast improvement over the previous draft.

“The first version was overwhelming: hard to read, hard to know what to do with the information,” said Jessalyn Dean, vice president of tax information reporting at crypto tax firm Ledgible. “This version is much more readable.”

Andrew Rossow, an attorney and CEO at AR Media Consulting, said these changes come closer to protecting privacy, but are still not enough. The IRS can do much more to make this filing process easier for investors.

Rossow explained that while the IRS was busy focusing on the centralized exchanges, it ignored this growing decentralized financial ecosystem that actually has a different set of rules for operating. It will stifle innovation, he said, and create an uneven playing field in this industry.

The World of Cryptocurrency Tax Rules: The Way Forward

The new plan comes just two months after the IRS issued rules for brokers to report virtual currency transactions. The statement also said that treating organized solutions as a decentralized and self-custodied brokerage firm will be part of the renewed direction in the coming year.

The IRS has not yet finalized Form 1099-DA; it may not be released until the 2025 tax year. The IRS’s move in this regard clearly demonstrates a greater emphasis on disclosure and observation. While it is certainly a step in the right direction, the new Form 1099-DA should be much more targeted to those who handle virtual money.

Main image from CNN, chart from TradingView