The Internal Revenue Service (IRS) has rolled out new crypto tax guidelines, intensifying its focus on decentralized finance (DeFi) services. The guidelines, announced on December 27, 2024, mandate that DeFi brokers collect and report detailed customer and transaction data. These changes aim to increase transparency and crack down on crypto tax evasion, a priority for the IRS as the agency continues leveraging advanced tools, including AI, to monitor the sector.
DeFi Brokers Now Required to Report Transactions
The new IRS guidelines require DeFi brokers to file detailed information returns using Form 1099-DA, which was expanded earlier this year to include digital assets. The form will require brokers to report gross proceeds from digital asset sales and exchanges made for customers. This marks a significant shift in the way decentralized finance platforms handle tax reporting, with more stringent documentation demanded from front-end services interacting directly with users.
However, it is important to note that while DeFi brokers will be responsible for reporting this data, the underlying protocols themselves are exempt from these requirements. This distinction means that only the service providers handling transactions with customers will need to comply, rather than the decentralized platforms facilitating the trades.
Timeline and Impact on DeFi Firms
The new reporting requirements will not be implemented until 2027, giving DeFi firms time to adapt to the changes. This delay offers a window for businesses to integrate the necessary reporting systems into their platforms. Despite the longer timeline, the IRS’s crackdown signals a growing effort to ensure tax compliance within the crypto industry.
For crypto enthusiasts, this means no immediate increase in tax rates. However, the new regulations are a reminder of the increasing scrutiny crypto markets are under, and the potential for future changes as global tax policies continue to evolve.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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