The Form 1099-DA: A New IRS Cryptocurrency Reporting Form
Contents
Form 1099-DA
The Internal Revenue Service has developed many different versions of Form 1099 to assist US taxpayers with computing and preparing their taxes. Some of the more common versions of the 1099 form are Form 1099-DIV (Dividends), Form 1099-INT (Interest), Form 1099-MISC (Miscellaneous Income), and 1099-G (State or Local Tax Refund). Now, the IRS has a new 1099 form brewing for proposed publication in 2024. The form is referred to as the 1099-DA — which refers to ‘Digital Assets.’ While the Form is not yet published, behind the scenes the IRS preparing the form and it should be released in 2024, for reporting on the 2023 tax return.
Form 1099-DA (What it May Contain)
Over the past several years, cryptocurrency has become much more popular and it is used for many different purposes. The problem is that since it is DeFi, it can be much more difficult for the US government to track the reporting and compliance of taxpayers for crypto transactions. In the past, the IRS has issued various notices such as Letter 6173 and 6174 to put Taxpayers on notice of crypto transactions that may be reportable – but the campaign did not bear the fruit that the IRS was hoping for.
What information May be Included on the 1099-DA?
Until a draft copy of Form 1099-DA is available, exactly what may be included on the Form is up for grabs. Generally, the purpose of the form is to facilitate taxpayer compliance with crypto reporting. This would presume that the exchanges would be required to report the information to taxpayers sufficient for the taxpayer to prepare their tax returns, primarily for issues such as capital gain and losses.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to streamlined procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead of the Streamlined Procedures. But, if a willful Taxpayer submits an intentionally false narrative under the streamlined procedures (and gets caught), they may become subject to significant fines and penalties.
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