IRS releases updated draft of Form 1099-DA for digital assets

The most recent draft of the form that brokers will use to report certain 2025 transactions involving the sale or exchange of digital assets reflects the final regulations (T.D. 10000) for custodial broker reporting that the IRS released in June.

The draft Form 1099-DA, Digital Asset Proceeds From Broker Transactions, also includes the transition relief described in Notice 2024-56, Notice 2024-57, and Rev. Proc. 2024-28.

The new form provides more clarity for taxpayers and will improve compliance with tax laws through third-party reporting, IRS Commissioner Danny Werfel said Friday in a news release.

“This step will also help us make sure digital assets are not used to hide taxable income, including in high-income categories, while providing taxpayers who play by the rules more information to accurately report their income,” Werfel said.

Overview of changes

The IRS made a few changes to the form, including the removal of the boxes on the initial draft relating to wallet addresses and hashes. Brokers are still required to collect this information but are not required to include it on the form, said Miles Fuller, senior director of government solutions at TaxBit, a cryptocurrency tax software company, and a former attorney at the IRS. The box to designate broker type has also been removed.

“The initial draft released in April included this box with a reference to unhosted wallet providers,” Fuller said in an email. “However, Treasury’s final regulations did not include rules for noncustodial brokers, and they will issue a separate set of rules in the future.”

He also noted that the form’s approach to asset identification in boxes 1a through 1c has not changed.

“This likely means that there will be a sort of IRS-based asset code registry to accommodate for the myriad types of digital assets, beyond what is common, such as bitcoin or ether,” Fuller said.

Box 1b may indicate that the broker will provide a name for the asset, Fuller said. “But sometimes the same name is used for multiple distinct projects,” he said. “Seeking more concrete details, such as the smart contract address creating the token, may be a better approach for clear asset identification.”

With boxes 11a through 11c, which deal with aggregate reporting for qualified stablecoins or nonfungible tokens (NFTs), the IRS seems to be looking for additional details about those assets, Fuller said. That includes a breakout in box 11c of proceeds “that likely should be characterized for tax purposes as ordinary income for the initial sale of an NFT by a creator,” he said.

Generally, brokers will send these forms to both taxpayers and the IRS in early 2026, the IRS said in the release.

Once the draft filer instructions have been posted, a notice will be published in the Federal Register to allow for a 30-day comment period. Comments about the draft form can be shared on the forms and publications comments page on irs.gov.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.