Crypto taxes are once again in the spotlight as the April tax deadline approaches more than 340 million Americans. But what’s the difference this year?
Starting this year, the Internal Revenue Service (IRS) will need brokers such as crypto exchanges, hosted wallet providers and payment processors that handle crypto transactions, to report to Form 1099-DA, a new form dedicated to digital asset transactions.
Kell Canty, CEO of Ledgible, told Thestreet Crypto:
Although 1099-DA brings more transparency, crypto holders are already expected to report profits and losses. “The IRS will know who, even if they receive 1099, have been told that crypto assets and taxpayers should report profits and losses in crypto,” Kanti said. “For the calendar year of 2024, brokers are expected to send 1099 MISC or NEC to customers to report income from staking and other compensation.”
Previously, taxpayers were mostly in the darkness. “Many people thought Crypto purchases and transactions were anonymous. I think many of us probably know that it’s not true,” Nik Fahrer, director of Forvis Mazars, said in a tax webinar. “Overall, there was a lack of tax knowledge in the space.”
“From a broker’s perspective, there was some confusion,” said Jessalyn Dean, Vice President of Tax Information Reporting at Ledgible. “Traditional revenue type transactions such as interest, staking fees, and gross payments were not reported at 1099.”
However, in recent years, the IRS has sought to clarify and standardize the rules that crypto taxpayers must follow. One of the most widely used tax forms, Form 1040, prominently asks whether a tax returner received, sold or exchanged cryptocurrency during the tax year. This now appears at the top, even before questions about gross income or standard deductions.