For people that have been enjoying trading digital assets, there are some unfortunate news in the horizon. The IRS has unveiled draft regulations mandating that brokers report transactions involving digital assets carried out by their clients. (Introduction to Proposed Regulation REG-122793-19; IRS Announcement 2023-153)
These proposed regulations address various issues related to digital assets such as disclosing proceeds to the IRS through a new Form 1099-DA.
For transactions involving digital assets occurring on or after January 1, 2025, the draft regulations would compel brokers to detail gross proceeds as well as to furnish statements to their clients. In specific scenarios, brokers would additionally be obliged to provide information regarding gains or losses and the basis for transactions taking place on or after January 1, 2026.
Moreover, the proposed regulations would necessitate individuals engaged in real estate reporting activities (e.g., title companies, closing attorneys, mortgage lenders, and real estate brokers) to report the transfer of digital assets used as consideration for real estate acquisitions in transactions finalizing on or after January 1, 2025. These entities would also be instructed to indicate the fair market value of digital assets remitted to real estate sellers in transactions closing on or after January 1, 2025, on Form 1099-S.
Since this is only in the proposed phase, there can be additional changes that are added in the future.