The Chamber of Digital Commerce proposes adding a field to the form for brokers to indicate if a digital asset has a different tax rate to prevent errors and ensure accurate reporting.
The Chamber of Digital Commerce, a leading trade association in the blockchain industry, has submitted its feedback on the United States Internal Revenue Service’s (IRS) proposed Form 1099-DA, which is intended for reporting digital asset transactions.
The chamber’s detailed response highlights the need to simplify the form, making it more straightforward for brokers dealing with digital assets such as cryptocurrencies to use. It also highlights privacy concerns, including requesting only the necessary information for reporting digital asset transactions by taxpayers.
Excessive information requests and privacy concerns
The chamber criticized the draft form for requesting excessive information. It suggests that the final form only requires information necessary for basic tax reporting, while brokers should retain additional details for use during specific IRS examinations.
The blockchain advocacy group also raised concerns about the form’s request for sensitive information such as transaction IDs and digital asset addresses. It argues that such details could infringe on taxpayer privacy and should only be collected if there is suspicion of criminal activity.
The feedback points out that the draft form implies the need for specific broker instructions, which were not included. The chamber advises the IRS to release the instructions for public review before finalizing the form to ensure brokers can accurately complete it.
It also suggested that the form should allow brokers to indicate if a digital asset is subject to a different tax rate, such as non-fungible tokens that might be treated as collectibles and taxed at a higher rate. It states that this would help prevent errors in IRS processing and ensure accurate tax reporting.
The IRS released the draft form on April 18 and invited comments. The chamber’s input follows its earlier comments on related proposed regulations submitted in November 2023.
According to the draft form, the brokers will prepare Form 1099-DA for every customer who sells or exchanges digital assets. Brokers include kiosk operators, digital asset payment processors, hosted wallet providers, unhosted wallet providers and others.
After announcing the proposed reporting requirements, the crypto community weighed in. The Blockchain Association said the rule contains “fundamental misunderstandings about the nature of digital assets and decentralized technology.”
Source: cointelegraph.com
