Chamber of Digital Commerce Provides Feedback on IRS Proposed Form 1099-DA for Digital Asset Transactions

The Chamber of Digital Commerce Pushes Back Against IRS Proposed Form for Reporting Digital Asset Transactions

The Chamber of Digital Commerce, a prominent trade association in the blockchain industry, has taken a stand against the United States Internal Revenue Service’s (IRS) proposed Form 1099-DA for reporting digital asset transactions. In a detailed response, the chamber highlighted the need for simplification of the form to make it more user-friendly for brokers dealing with digital assets like cryptocurrencies.

One of the key points of contention raised by the chamber was the excessive information requests on the draft form. They argued that the final form should only require essential information for basic tax reporting, with brokers retaining additional details for specific IRS examinations. Privacy concerns were also a major focus, with the chamber expressing reservations about the request for sensitive information such as transaction IDs and digital asset addresses, which could potentially infringe on taxpayer privacy.

Furthermore, the chamber emphasized the importance of specific broker instructions being included in the form and suggested allowing brokers to indicate if a digital asset is subject to a different tax rate, such as non-fungible tokens being treated as collectibles and taxed at a higher rate. This, they argued, would help prevent errors in IRS processing and ensure accurate tax reporting.

The IRS released the draft form on April 18 and invited comments from industry stakeholders. The chamber’s feedback follows their earlier comments on related proposed regulations submitted in November 2023. According to the draft form, brokers will be required to prepare Form 1099-DA for every customer who sells or exchanges digital assets, including kiosk operators, digital asset payment processors, hosted wallet providers, unhosted wallet providers, and others.

The crypto community has also weighed in on the proposed reporting requirements, with the Blockchain Association criticizing the rule for its “fundamental misunderstandings about the nature of digital assets and decentralized technology.” As the debate continues, it remains to be seen how the IRS will address the concerns raised by industry stakeholders like the Chamber of Digital Commerce.