1099-DA Reporting = Monster Crypto Tax Headaches
Apr 28, 2023You get an impossible task with more work
This week I already did the heavy lifting via my Coindesk Opinion piece. I'll also give you some other stuff below so read that first then click on the article link. Please read here 1099-DA Reporting Creates More Headaches for Taxpayers
MONSTER headaches
Published articles are limited in word count so there are numerous other issues not covered. Don't worry we'll cover them as time goes on. Crypto tax management is already a huge headache but the new reporting rules from the Infrastructure Act is going to make it seem like "you ain't seen nothin' yet." That's why we're going from huge headache to MONSTER headache.
The million-dollar question
The skinny is centralized exchanges are considered brokers and crypto is considered a security for purposes of this reporting requirement. You'll get 1099-DAs much like 1099-Bs from securities brokers. Then you get relegated to reconciling 1099-DAs with your own universal calculation. There will be broker reporting mistakes and omissions. How do you fix those? Well, that is the million dollar question.
Don't let tax season drain your profits.
Avoid 7 Costly Crypto Tax Pitfalls
Saving grace
Fortunately, IRS proposed regulations and a public comment period happens before the reporting kicks in. Actually final regulations have to issued first. That could take awhile. Some final regulations (other tax stuff) have never been issued and some have taken 10 years for example.
Your CALL TO ACTION is to participate in the public comment period. (not live yet) Tell them it's going to be a nightmare and cost basis should not be reported (I don't know if that will make a difference but it's a good compromise; then only proceeds get reported)
Good luck and remember your goal is always a Crypto Bullseye™.
Yours in Crypto,
Kirk Phillips, CPA, CMA, CFE, CBP
DISCLAIMER
The information in this post can not be construed as tax, legal or investment advice because professional advice can only be dispensed with an official engagement letter.