Jessalyn Dean, VP of Tax Information Reporting at Ledgible, recently joined NASDAQ Trade Talks to provide insights into the ever-evolving landscape of digital asset tax reporting. With the IRS introducing Form 1099-DA and rolling out new regulations, the discussion highlighted critical changes and their impact on both taxpayers and brokers in the digital asset ecosystem.
Changes to Tax Reporting and the Introduction of Form 1099-DA
The introduction of Form 1099-DA is a landmark shift in tax reporting for digital assets. Dean noted that the look and feel of Form 1099-DA mirrors that of Form 1099-B, a familiar form for taxpayers who report stock or securities transactions. This familiarity could significantly lower the barrier to entry for individuals hesitant to invest in digital assets due to the complexity of managing taxes.
For many taxpayers, this change simplifies the reporting process. Those buying, holding, and selling digital assets within a single platform will see benefits as soon as 2026 when the first Form 1099-DA filings are issued for the 2025 tax year. By 2027, for transactions in 2026, these taxpayers can expect complete and seamless cost basis reporting with no gaps.
Challenges for Brokers
The conversation also touched on the regulatory responsibilities facing digital asset brokers. Dean explained that many potential brokers remain in the "denial phase," unsure or unaware that the new rules apply to them. A significant challenge lies in understanding the flow of data and funds within their ecosystems, where multiple parties interact with a single transaction.
Some brokers assume that someone else in the transaction chain will fulfill the reporting obligation, leading to potential gaps or duplications in reporting. Dean emphasized the importance of identifying clear "tie-breaker" rules to avoid situations where either no one reports a transaction or the same transaction is reported multiple times. Achieving compliance across the industry will require education, clarity, and collaboration among brokers and regulators.
A Global Perspective on Regulation
Beyond the US, digital asset tax regulations are evolving globally, creating both opportunities and challenges for the industry. Dean highlighted that as the US continues to refine its regulatory framework, the world is watching closely. Institutional adoption, product innovation, and regulatory compliance will drive the next wave of growth in digital assets.
What’s Next for Digital Asset Tax Compliance?
Dean's insights shed light on the rapidly changing landscape of digital asset tax compliance. While Form 1099-DA is a step forward in simplifying reporting for taxpayers, the broader adoption and compliance process will take time. As the IRS, brokers, and taxpayers navigate these changes, collaboration and adaptability will be key to ensuring the successful implementation of these groundbreaking rules.
At Ledgible, we're proud to contribute to this evolution by providing robust tools and expertise to help the industry stay ahead of the curve. Stay tuned for more updates as we continue to lead the charge in digital asset tax reporting.
