The US Internal Revenue Service (IRS) has recently released an updated draft version of the 1099-DA tax form, specifically designed for reporting digital asset transactions in the upcoming 2025 tax period. This new version represents a significant improvement from the original draft, which was presented in April 2024. The IRS has made this new draft regulation available on its website for public review and feedback for the next 30 days.

One of the key changes in the updated IRS 1099-DA form is the removal of the requirement for investors to disclose their wallet address and transaction ID. This modification addresses privacy concerns raised by crypto investors and brokers alike. Additionally, the updated form now only requires the date of the transaction, eliminating the need to include the exact time.

Another significant change is that brokers are no longer required to indicate the type of brokerage they are involved in on the form. This simplifies the reporting process for brokers and streamlines the information provided on the 1099-DA form.

According to Raj Mukherjee and Seth Wilks, Directors of the IRS Office of Digital Asset Initiative, the new 1099-DA form will help taxpayers navigate the complexities of digital asset taxation. Crypto tax professionals have praised this revised form, highlighting its improved readability compared to the previous version.

However, experts believe that there is still room for further improvement. While the IRS has taken steps to address privacy concerns, some argue that more can be done to make the filing process easier for crypto investors. Andrew Rossow, an attorney and CEO at AR Media Consulting, suggests that the IRS should consider better understanding and accommodating the decentralized finance ecosystem, which operates under different rules than centralized exchanges.

It is worth noting that the IRS has not yet finalized the 1099-DA form, and its release might be reserved for the 2025 tax year. Nevertheless, this move by the IRS demonstrates an increased emphasis on disclosure and observation in the world of cryptocurrency tax regulations.

As the total crypto market cap continues to reach $2 trillion, the IRS aims to keep up with the evolving landscape by treating organized solutions, such as decentralized and self-custodied brokerage businesses, as part of its renewed focus in the upcoming year.

While the updated 1099-DA form is a step in the right direction, many assert that it should be further tailored to the needs of individuals dealing with virtual currencies. With ongoing discussions and feedback, the IRS aims to strike a balance between effective regulation and accommodating the unique nature of the digital asset space.