The Digital Chamber of Commerce, a prominent organization in the blockchain industry, has provided its input on the proposed Form 1099-DA by the United States Internal Revenue Service (IRS) for reporting digital asset transactions.
In its detailed response, the chamber emphasizes the importance of simplifying the form to make it more user-friendly for brokers handling digital assets like cryptocurrencies. It also raises concerns about privacy issues, urging for only essential information to be requested for reporting digital asset transactions by taxpayers.
Criticism was directed at the draft form for asking for excessive information. The chamber suggests that the final version should only include necessary details for basic tax reporting, with brokers retaining additional information for IRS examinations when required.
Additionally, concerns were raised by the blockchain advocacy group regarding the form’s request for sensitive data such as transaction IDs and digital asset addresses. It argues that collecting such information could violate taxpayer privacy and should only be done if there are suspicions of criminal activities.
The feedback also highlights the need for specific broker instructions, which were missing in the draft form. The chamber recommends that the IRS release these instructions for public review before finalizing the form to ensure accurate completion by brokers.
The chamber also proposed that the form should allow brokers to indicate if a digital asset is subject to a different tax rate, like non-fungible tokens that may be considered as collectibles and taxed at a higher rate. This, according to the chamber, would help in preventing processing errors by the IRS and ensure precise tax reporting.
The IRS introduced the draft form on April 18 and sought comments. The Digital Chamber’s feedback follows its previous comments on related proposed regulations submitted in November 2023.
As per the draft form, brokers will be required to prepare Form 1099-DA for each customer who sells or exchanges digital assets. Brokers encompass kiosk operators, digital asset payment processors, hosted wallet providers, unhosted wallet providers, and others.
Upon the announcement of the proposed reporting requirements, the crypto community expressed its views. The Blockchain Association criticized the rule for containing “fundamental misunderstandings about the nature of digital assets and decentralized technology.”
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