The IRS has issued final regulations (T.D. 10000) to provide guidance addressing broker reporting on the disposition of digital assets in exchange for cash, other digital assets, stored-value cards, broker services or property in a transaction subject to current broker reporting requirements. The regulations phase in beginning Jan. 1, 2025, and address information to be reported on the yet-to-be-released Form 1099-DA, Digital Asset Proceeds from Broker Transactions.
The final regulations address the digital asset reporting requirements for brokers added to §6045 by the 2021 Infrastructure Investment and Jobs Act. Brokers include digital asset trading platforms, digital asset payment processors, certain digital asset-hosted wallet providers and persons who regularly offer to redeem digital assets they have created.
According to the regulations, brokers must file information reports and furnish payee statements reporting gross proceeds and adjusted basis on dispositions of digital assets by customers involved in certain sale or exchange transactions. The regulations also provide rules for computing gain or loss, determining basis and backup withholding for transactions involving the sale or exchange of digital assets.
The newly issued regulations finalize proposed regulations released in August 2023 and apply to both brokers that take possession of digital assets sold by customers and real estate reporting persons when the buyer uses digital assets. Real estate reporting persons who are treated as brokers are those responsible for closing the transaction. If no person is responsible for closing, the real estate reporting person is the mortgage lender, the transferor’s broker, the transferee’s broker or the person designated under Treasury regulations. However, real estate reporting persons who do not know a buyer used digital assets to make payments will not be required to file a report.
The broker reporting requirements phase in over two years:
- Gross proceeds must be reported for transactions on or after Jan. 1, 2025
- Basis for certain transactions must be reported on or after Jan. 1, 2026
- Real estate professionals treated as brokers must report the fair market value of digital assets paid by buyers and received by sellers for real estate transactions on or after Jan. 1, 2026
Notices offer additional guidance
The IRS issued two notices in conjunction with the finalized regulations to provide additional guidance on broker reporting. Notice 2024-56 gives brokers transitional penalty relief if they don’t report sales of digital assets and furnish payee statements in 2026 for sales of digital assets in the 2025 calendar year if the broker makes a good faith effort to comply with the regulations. Brokers are also provided with relief from certain backup withholding obligations and associated penalties for 2025 and 2026.
Notice 2024-57 states that brokers are not required to file information returns or furnish payee statements for the following transactions:
- Wrapping and unwrapping transactions
- Liquidity provider transactions
- Staking transactions
- Transactions digital asset market participants describe as the lending of digital assets
- Transactions digital asset market participants describe as short sales of digital assets
- Notional principal contract transactions
To learn more about the reporting of digital assets, check out our on-demand webinar. This webinar is presented by cryptocurrency specialist, Matt Metras, EA. You’ll learn the basics of blockchain and cryptocurrency, and how to report common crypto situations.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.