According to a proposed Treasury Department rule released on Friday, cryptocurrency brokers, including exchanges and payment processors, would have to provide the Internal Revenue Service (IRS) with updated information on users’ sales and exchanges of digital assets.
The regulation is a part of a larger effort by Congress and regulatory agencies to tighten down on cryptocurrency users who may be evading taxes.
The Treasury Department said a proposed new tax reporting form, known as Form 1099-DA, is intended to help taxpayers identify whether they owe taxes and would allow cryptocurrency users avoid having to perform complex computations to establish their gains.
According to Treasury, it would also subject brokers of digital assets to the same information reporting requirements as brokers for other financial products like bonds and equities.
The definition of a “broker” under the plan would encompass decentralized and centralized digital asset trading platforms, cryptocurrency payment processors, and specific online wallets where users store digital assets. The law would apply to non-fungible tokens as well as cryptocurrencies like bitcoin and ether.
To aid in the preparation of their taxes, brokers would need to deliver the papers to both the IRS and owners of digital assets.
The $1 trillion 2021 Infrastructure Investment and Jobs Act featured a section that sought to impose stricter tax reporting obligations on brokers of digital assets, which is where the additional rules came from. The IRS was given instructions to specify which businesses qualified as cryptocurrency brokers and to offer paperwork and reporting guidelines.
Additionally, digital assets were included in the reporting requirements for certain monetary transactions over $10,000.
The new regulations were expected to generate up to $28 billion in revenue over a ten-year period at the time the measure was passed.
For the 2026 tax filing season, the Treasury suggested that the restrictions take effect for brokers in 2025.
According to a statement from the Treasury, this is a part of a larger initiative to eliminate the tax gap, address the dangers of tax evasion posed by digital assets, and help ensure that everyone follows the same set of regulations.
Trading cryptocurrencies is one of the many digital asset activities that users of cryptocurrencies are currently required to record on their tax returns, regardless of whether the transactions produced a profit. Users are obliged to perform the calculation on their own, and the trading platforms for digital assets do not provide that information to the IRS.
In a letter issued earlier this month, a number of Democratic senators, including Elizabeth Warren, pleaded with the Treasury to apply the regulations right now because, in their words, failing to do so would allow tax cheats and cryptocurrency middlemen to “continue to game the system.”
Till October 30th, the Treasury Department and the IRS are seeking comments on the idea. On November 7-8, they will also hold public hearings on the idea.
