U.S. Treasury Finalizes Crypto Reporting Rule to Enhance Tax Compliance

New Crypto Reporting Requirements

The U.S. Treasury Department has enacted a rule requiring cryptocurrency brokers, including exchanges and payment processors, to report users' digital asset transactions to the IRS. This move targets improved tax compliance among crypto users, addressing concerns of unpaid taxes. The regulation stems from the 2021 Infrastructure Investment and Jobs Act and is projected to generate approximately $28 billion over ten years.

Alignment with Existing Financial Instruments

The rule, effective for the 2026 tax filing season, aligns cryptocurrency tax reporting with existing requirements for other financial instruments like bonds and stocks. By introducing a phased approach, the Treasury aims to minimize burdens on brokers while ensuring compliance. A notable feature is the $10,000 reporting threshold for stablecoin transactions, which are typically linked to assets like the U.S. dollar.

Industry Response and Modifications

The cryptocurrency industry initially opposed the proposed rule, citing broad definitions and privacy concerns. Following feedback from over 44,000 comments, the Treasury made adjustments to ease broker obligations and plans to issue additional rules for non-custodial brokers, including decentralized exchanges.

Introduction of Form 1099-DA

A new tax reporting form, Form 1099-DA, has been introduced to simplify the tax filing process for digital asset transactions. This form will aid taxpayers in accurately determining tax liabilities without complex calculations. Brokers are required to send these forms to both the IRS and digital asset holders, facilitating clearer tax preparation.

Ensuring Accurate Tax Reporting

The IRS mandates that crypto users report all digital asset activities, regardless of gain or loss. The new rule emphasizes that crypto owners have always been subject to tax obligations on digital asset sales and exchanges. By establishing clear reporting requirements, the Treasury aims to assist taxpayers in fulfilling their tax duties under current law.