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The Chamber of Digital Commerce, a prominent trade association within the blockchain industry, has submitted feedback regarding the United States Internal Revenue Service’s (IRS) proposed Form 1099-DA, designed for reporting digital asset transactions.
Simplification and Privacy Emphasis
In its detailed response, the Chamber emphasized the need for the form to be more user-friendly for brokers handling digital assets like cryptocurrencies. The feedback also underscored significant privacy concerns, advocating for the collection of only essential information required for tax reporting.
Criticism of Excessive Information Requests
The Chamber criticized the draft form for demanding excessive information, suggesting that only the necessary data for basic tax reporting be included. Additional details, it argued, should be retained by brokers for use only during specific IRS examinations.
Privacy Concerns on Sensitive Information
A major concern raised by the Chamber is the form’s request for sensitive details such as transaction IDs and digital asset addresses. The group contends that collecting such information could infringe on taxpayer privacy and should be limited to cases where there is suspicion of criminal activity.
Need for Clear Broker Instructions
The feedback highlighted that the draft form implies the necessity for specific broker instructions, which were not provided. The Chamber advised the IRS to release these instructions for public review before finalizing the form to ensure brokers can complete it accurately.
Additional Recommendations
The Chamber suggested that the form should allow brokers to indicate if a digital asset is subject to a different tax rate. For example, non-fungible tokens (NFTs) might be treated as collectibles and taxed at a higher rate. This recommendation aims to prevent processing errors and ensure accurate tax reporting.
Background and Community Response
The IRS released the draft form on April 18 and invited public comments. The Chamber’s feedback follows its earlier comments on related proposed regulations submitted in November 2023. According to the draft, brokers will prepare Form 1099-DA for each customer who sells or exchanges digital assets, including kiosk operators, digital asset payment processors, hosted wallet providers, unhosted wallet providers, and others.
The broader crypto community has also voiced its opinions. The Blockchain Association criticized the proposed reporting requirements, claiming they reflect “fundamental misunderstandings about the nature of digital assets and decentralized technology.”
By addressing these concerns, the Chamber of Digital Commerce hopes to influence the final design of Form 1099-DA to better balance regulatory requirements with privacy protections for taxpayers involved in digital asset transactions.
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