IRS Finalizes Rules for Crypto Tax Reporting

The US Treasury Department has introduced new regulations to ensure accurate tax reporting on cryptocurrency transactions. These rules aim to make sure that everyone pays the correct amount of taxes when selling cryptocurrency.

Previously, paying taxes on crypto earnings was required, but specific rules for the process were lacking. Now, cryptocurrency platforms must report users' transactions to the Internal Revenue Service (IRS), a measure designed to prevent tax evasion.

IRS Commissioner Danny Werfel commented, "We reviewed thousands of public comments and believe this new guidance addresses those concerns while striking a balance between industry implementation challenges and closing the tax gap related to digital assets. These regulations are an essential part of the larger effort on high-income individual tax compliance. We need to ensure digital assets are not used to hide taxable income, and these final regulations will improve detection of noncompliance in the high-risk space of digital assets."

As per the new rules, cryptocurrency platforms will also have to provide users with 1099 forms at the end of the year. This should simplify the process of reporting profits or losses on taxes. The IRS had previously released a draft of the 1099-DA (Digital Asset Proceeds From Broker Transaction) form last year and plans to finalize it soon.

Additionally, real estate professionals will now be required to report the fair market value of digital assets paid by buyers and received by sellers in real estate transactions, starting with closing dates on or after January 1, 2026.

These new regulations will take effect for transactions completed in 2025. For the current year, traders must continue to manage their tax reporting independently.