The US Department of the Treasury and the Internal Revenue Service (IRS) have jointly announced a proposed regulation aimed at making digital transaction reports easier. According to the organizations, the proposal will take effect on January 1, 2025.
Additionally, it will require brokers, including digital asset trading platforms, payment processors, and specific wallet providers, to report sales and exchanges of digital assets to the IRS and Department of Treasury.
One of the challenges faced in the digital economy, especially in crypto, is the lack of clarified steps to report transactions to the designated authorities.
Several nations, including China, Singapore, and the EU, that have shown interest in the crypto industry are trying to design rules to cover such activities, including taxation.
The proposal highlights Form 1099-DA, a new reporting system that will facilitate the reporting of gross proceeds and basic information to the IRS, aiding taxpayers in accurately preparing their tax returns.
Speaking about the proposal, IRS Commissioner Danny Werfel said that it will help reduce confusion surrounding digital assets.
He added that the regulations seek to create a transparent reporting framework for high-income individuals and others who utilize digital assets for fair and more accurate tax contributions.
Digital real estate, crypto miners, and DeFi platforms
Furthermore, real estate brokers that handle digital assets as part of real estate transactions will also be required to report dispositions of digital assets used as consideration for real estate purchases starting January 1, 2025.
While crypto miners have been granted an exemption from these new tax rules, the DeFi sector will not receive the same exemption.
The rule that is set to be implemented with full application to crypto exchanges in the 2025 tax year and brokers in the 2026 tax year is currently going through public scrutiny for feedback and potential adjustments before full implementation.
If this is implemented, will all DeFi platforms still be decentralized or under the control of legacy systems?