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The IRS has unveiled a draft of Form 1099-DA, which includes a requirement to reveal self-custody wallet addresses
The draft aligns with a set of regulations proposed by the tax office last year
The form, available on the IRS website, reflects the agency’s ongoing efforts to enhance tax compliance in the digital asset space

The Internal Revenue Service (IRS) this week unveiled a draft of a tax from which suggests that the agency wants to take a look inside your self-custodied wallets. The draft of form 1099-DA, Digital Asset Proceeds From Broker Transaction, which is available on the IRS website, follows proposed regulations published by the IRS last year, which aim to improve compliance with tax obligations related to digital assets. Crypto users are concerned by the information the IRS now requires, including about their self-custodied holdings, which they may have to state to the IRS.

More Reporting for Brokers

Under the IRS’ proposed regulations, brokers, including digital asset trading platforms and payment processors, are required to report customers’ sales and exchanges of digital assets to the authority. This reporting obligation extends to transactions occurring on or after January 1, 2025.

Furthermore, the proposed regulations mandate real estate reporting persons, such as title companies and mortgage lenders, to report the disposition of digital assets used as consideration in real estate transactions. This requirement is applicable to transactions closing on or after January 1, 2025, and aims to address potential tax implications arising from the use of digital assets in real estate transactions.

Unhosted Wallets Included for First Time

Of more concern to crypto users, however, is a box where taxpayers must clarify what type of broker was involved in the transaction being reported; one box reads “Unhosted Wallet Provider,” meaning a self-custodial crypto address not affiliated with any third party. This means that the IRS will start collating a list of citizens’ DeFi and NFT wallet addresses, allowing them further insight into your activities.

This led many to believe that the days of crypto privacy are gone:

I don’t think crypto will be pseudo-anonymous or privacy-preserving anymore, at least in the US.

Yesterday, the IRS issued the long-awaited draft Form 1099-DA, the first tax form specifically designed to collect your ID and detailed transaction data at scale from “brokers”.… pic.twitter.com/H4aTtm5fp9

— Shehan (@TheCryptoCPA) April 19, 2024

The IRS’s expanded definition of digital assets encompasses a wide range of assets, including non-fungible tokens (NFTs) and virtual currencies like cryptocurrencies and stablecoins. This broad definition reflects the evolving nature of digital assets and the IRS’s efforts to keep pace with technological advancements in the crypto space.

Wait for Final Version

While the draft form provides valuable insights into the IRS’s proposed reporting standards for digital asset transactions, it must be remembered that this is only a draft. Official approval from the Office of Management and Budget (OMB) is required before the form can be officially released for use in tax filings.

Until then, taxpayers have been advised to await the official release of Form 1099-DA and comply with existing tax reporting requirements.

The post Will Americans Have to Reveal Self-custodied Crypto to IRS? appeared first on FullyCrypto.

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Filed under: Bitcoin - @ April 24, 2024 8:17 am