Global Daily Tax News, IRS Extends Crypto Asset Reporting Reliefs For Brokers, (Jun 17, 2025)

The US Treasury Department and the Internal Revenue Service has issued a Notice extending and modifying the transitional relief provided in Notice 2024-56 for brokers required to file Form 1099-DA to report certain digital asset sale and exchange transactions by customers.

In 2024, Treasury and IRS announced final regulations requiring brokers to report digital asset sale and exchange transactions on Form 1099-DA. The obligation applies to digital asset trading platforms, digital asset payment processors, and certain digital asset hosted wallet providers.

In addition, these taxpayers were required to backup withhold on certain transactions beginning January 1, 2025, and must issue payee statements to customers, beginning in 2026.

In 2024, alongside the final regulations, the IRS announced in Notice 2024-56 transitional relief from penalties related to information reporting and backup withholding tax liability required by these final regulations for transactions effected during 2025. Additionally, Notice 2024-56 also provided limited transition relief from backup withholding tax liability for transactions effected in 2026.

In response to calls from brokers for additional time to comply with the reporting requirements, the IRS has issued Notice 2025-33, which extends the transition relief from backup withholding tax liability and associated penalties for any broker that fails to withhold and pay the backup withholding tax for any digital asset sale or exchange transaction effected during calendar year 2026.

The notice also extends the limited transition relief from backup withholding tax liability for an additional year. Specifically, brokers will not be required to backup withhold for any digital asset sale or exchange transactions effected in 2027 for a customer (payee), if the broker submits that payee's name and tax identification number (TIN) to the IRS's TIN Matching Program and receives a response that the name and TIN combination matches IRS records.

Additionally, the Notice provides relief to brokers that fail to withhold and pay the full backup withholding tax due, if the failure is due to a decrease in the value of withheld digital assets in a sale of digital assets in return for different digital assets in 2027, providing the broker immediately liquidates the withheld digital assets for cash.

The Notice also provides additional transition relief for brokers for sales of digital assets effected during calendar year 2027 for certain customers that have not been previously classified by the broker as US persons.