The tax authorities in the United States have revealed a revised form for crypto investors. The goal is to make it easy for digital asset holders to pay their taxes.
On Friday, the IRS unveiled the 1099-DA as a draft and it provides tax filers more ‘ease and clarity’ regarding their crypto investments.
The Form
The new form does not have some of the requirements that were a part of its previous iteration.
This includes some questions that had been considered rather intrusive by proponents and invasion of privacy of crypto holders.
The most important thing to note is that the form’s latest version does not ask filers to share their transaction IDs and crypto wallet addresses.
In addition, filers are no longer required to provide the time of the crypto transactions in relation to their investment activity for the year in question.
Furthermore, crypto brokers who file their taxes are no longer required to specify the type of broker they are.
According to experts, the latest revisions that have been made in the 1099-DA are certainly reassuring. They will alleviate some of the privacy concerns of digital asset investors.
However, they also asserted that there is still a lot more that US tax authorities can do to make the filing process simpler and easier for investors.
The Challenges
While the new form may have addressed some of these issues, it still does not provide a solution for the challenges that are associated with tax compliance in the crypto industry.
The crypto tax landscape is laden with complications for both businesses and individuals. This is particularly true because the CFTC/SEC are still having a debate about swimlanes.
Furthermore, it appears that the IRS is only focused on mainstream avenues, even though the broader crypto market is quite diverse.
They have chosen to focus on centralized exchanges, such as Kraken and Coinbase. However, the expanding DeFi ecosystem has not been taken into account, even though it has different principles.
If this continues, it could prevent the crypto industry from experiencing innovation. Moreover, it would also leave the playing field uneven.
The Possibilities
Not only will crypto businesses have to deal with higher compliance costs, but there could also be risks due to the collection of data.
The government will have increasing access to financial data and this could result in unintended consequences and overreach.
This opens up a strong possibility of identity theft and data breaches. It was in April this year that the draft 1099-DA form had first been unveiled in the US.
According to the IRS, there is a 30-day period for members of the public to share their opinions regarding the latest draft.
It is unclear for now as to when the IRS will unveil the final version of the form. Likewise, the timing of the form’s debut also remains uncertain.
However, it is widely expected that the form will be put in use for the 2025 tax year.