Digital Chamber raises privacy concerns over IRS crypto tax draft


The Digital Chamber of Commerce, a leading trade association in the blockchain industry, has submitted its feedback on the IRS’s proposed Form 1099-DA, which is intended for reporting digital asset transactions. 

The Chamber’s detailed response aims to simplify the form, make it easier for brokers who deal with digital assets such as cryptocurrencies to use, and address taxpayers’ privacy concerns, including the need to request only the necessary information for reporting digital asset transactions by taxpayers.

The Chambers feedback

The Chamber criticized the draft form for requesting excessive information. It suggests that the final form only require information necessary for basic tax reporting, while brokers should retain additional details for use during specific IRS examinations.

Source: The Digital Chamber

The Chamber also raised concerns about the form’s request for sensitive information such as transaction IDs and digital asset addresses. They argue that such details could infringe on taxpayers’ 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 these instructions for public review before finalizing the form to ensure brokers can accurately complete it.

Related: Blockchain Association objects to IRS broker rule in letter

The Chamber 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 (NFTs) that might be treated as collectibles and taxed at a higher rate. This would help prevent errors in IRS processing and ensure accurate tax reporting.

The draft form

The IRS released the draft form on April 18, 2024, and invited comments in the Federal Register on April 22, 2024. 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 on them. The Blockchain Association said the rule contains “fundamental misunderstandings about the nature of digital assets and decentralized technology.”

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