Accounting
Tax Strategy: Developments in the taxation of digital assets
The taxation of digital assets continues to be an area of confusion. The Internal Revenue Service has long taken the position that digital assets are treated the same as other property and are taxed when you receive them as payment for a transaction or where you sell them or trade them in a transaction. Like other property, digital assets are not taxed when you receive them for cash.
However, issues have come up when digital assets are received for other purposes, such as through forks, mining or staking — transactions involving digital assets which as capital assets would be reported on Form 8949.
The recent focus by the IRS has been on broker reporting of digital asset transactions to try to reduce noncompliance in the area. The Infrastructure Investment and Jobs Act authorized the broker reporting of digital assets. Form 1099-B, the existing broker reporting form, was initially used for the reporting requirement. Questions arose, however, as to who is a broker in the digital assets context and whether the entities that the IRS designated as digital asset brokers have the information to make the required reports to the IRS.
The IRS has now developed Form 1099-DA for digital assets. Final regulations on broker reporting were issued on June 28, 2024. The service is hoping to be able to match Form 1099-DA reports from brokers to Form 8949 reports from taxpayers.
Form 1040 reporting
For 2024 tax returns, the digital asset question on the Form 1040 has not changed from 2023: “At any time during 2024, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
There are disputes between the IRS and the crypto industry about when crypto is converted into something else. For example, there is currently litigation over whether rewards of additional crypto for staking — the process of locking up your cryptocurrency in a wallet to help run a blockchain — results in a taxable transaction (the view of the IRS if the taxpayer has the ability to sell, exchange or otherwise dispose of the rewards) or a nontaxable transaction (the Jarrett cases).
In Revenue Ruling 2023-14, the IRS reaffirmed its position that staking rewards are taxable. The IRS issued a refund in the first Jarrett case to get a court decision that the issue was moot and no decision on the merits was made. In Rev. Rul. 2023-14, the IRS did not provide any guidance as to how staking awards should be valued. It also stated that it was taking no position at the time as to whether “gas” fees paid to a validator for the cost of the computing power used in the validation process are taxable.
Since digital assets are not viewed by the IRS as securities, the wash sale rules do not apply to digital asset transactions. Digital assets treated as capital assets qualify, along with other capital assets, for tax loss harvesting.
Broker reporting
The issues that have come up with broker reporting of digital asset transactions include who is a broker; getting the brokers to report not only the values of digital assets at the time of the transaction but also the cost basis of those assets; helping broker reporting match taxpayer reporting; and determining what information is available to the brokers to comply with filing the Form 1099-DA.
The final version of the 2025 1099-DA was issued on Jan. 10, 2025. It is to be used for 2025 transactions and issued by Feb. 17, 2026 (electronically by March 31, 2026). The instructions discuss reporting of when the broker is using customer-provided information (Box 8), dates of transfer (Box 12b), and reporting of nonfungible tokens and stable coins.
To assist traditional brokers who only have limited involvement with digital assets, Form 1099-B may still be used for tokenized securities settled or cleared on a limited-access regulated network. To assist brokers in transitioning to the new reporting requirements, the IRS is deferring broker reporting of the cash basis on digital assets until 2026. The IRS is also planning to require that, in determining the digital assets to look at for the cost basis, the taxpayer look only to the particular wallet or account held by the broker, again so that the 1099-DA information is more likely to match the information on the tax return.
There are issues with calculating the crypto cost basis to apply. Taxpayers would generally prefer to apply specific identification by the taxpayer so that the taxpayer can select the highest-basis crypto that is being sold. The IRS wants the broker custodian of the crypto and even trading front-end service providers (DeFi brokers) to report the cost basis on Form 1099-DA.
The service is also proposing that, to help the crypto broker reporting on Form 1099-DA match what the taxpayer is reporting on the tax return, the cost basis be determined separately for each wallet, rather than being able to combine all similar crypto held in separate wallets. For 2025, Form 1099-DA is being required to be filed by crypto brokers; however, the cost basis is not being required. Litigation is also challenging the application of the broker reporting requirements to DeFi brokers.
Revenue Procedure 2024-28 provides a safe harbor under Code Sec. 1012(c)(1) to allocate unused basis of digital assets held within each wallet or account of the taxpayer as of Jan. 1, 2025. The default allocation of basis is based on first-in/first-out principles; however, the taxpayer or the broker, as directed by the taxpayer, may utilize specific identification. The deadline for making the allocation is the earlier of the date of the first sale in the year or the due date for the 2025 tax return. Frequently asked questions provide guidance as to when specific identification can be used.
Notice 2024-56 provides transitional relief to brokers who fail to report sales of digital assets or fail to do back-up withholding. It also permits brokers to rely on uncertified taxpayer identification numbers for 2026. Several types of transactions are specifically excluded from broker reporting requirements. Notice 2024-57 provides related penalty relief for brokers’ failure to file information returns.
To help crypto brokers get their technology together to do cost-basis reporting, the IRS has delayed the crypto cost-basis reporting requirement until after Dec. 31, 2025. This permits taxpayers to continue to use specific identification for crypto transactions based on the taxpayer’s books and records rather than the broker’s 1099-DA report for 2025. FIFO remains the default treatment for 2025 if the taxpayer does not do specific identification.
Summary
The IRS is still struggling to keep up with all the forms of digital asset transactions as they are developed. It is also struggling to get effective third-party reporting by brokers in order to reduce taxpayer noncompliance. In the meantime, the crypto industry hopes that the Trump administration might have a friendlier tax view of crypto transactions, and the IRS focus might change under new leadership.
AP-focused financial automation platform
Stampli Procure-to-Pay, which uses the company’s AI assistant Billy the Bot, has the ability to turn plain conversational text into structured purchase orders and financial documents, replacing rote data entry. Stampli observed that procurement often involves dynamic conversations between multiple stakeholders, such as finance teams, employees and vendors. These conversations, though, tend to take place on separate channels, emails and chat tools versus the procurement platform itself, which breaks the audit trail.
The conversation-first approach, on the other hand, allows the software to capture and contextualize all procurement discussions within each transaction’s workflow. It can support an existing intake process, approval workflow or business requirement. The system uses AI-powered approval flows guided by historical patterns. It automatically suggests preferred items and vendors based on an analysis of purchasing patterns. The program generates formatted purchase orders directly within customers’ ERP systems.
“Only Stampli unifies all procurement processes, documents and discussion into a single intelligent workflow,” said Stampli CEO and co-founder Eyal Feldman. “Everything happens within Stampli: every step, every approval, every budget review, and every conversation, in perfect harmony with your ERP.”
For example, according to the CEO in a later email, a user could describe their office supply needs in plain language. Billy the Bot analyzes the text and extracts the item names, quantity and context, then maps them to stock-keeping units, descriptions and costs. This process requires no special training and is designed to encourage employees to use the system and not try to bypass or ignore it, which creates challenges in terms of compliance as well as workflow efficiency.
Stampli said its new solution can be implemented within weeks. Once deployed, it will adapt to existing processes, reducing the amount of necessary change management.
The announcement comes a few months after the
Cloud ERP solutions provider
“Acumatica’s AI capabilities are designed to automate and eliminate error-prone manual processes and enable businesses to intelligently streamline workflows across industries,” said Acumatica chief engineering officer Miten Mehta. “From Generative AI assistants to smart automated sales workflows tailored to unique operational needs, our tools integrate seamlessly into existing workflows, making them immediately impactful. We’ve created a stable, secure foundation, ensuring businesses can confidently integrate AI technologies into their processes—whether AI-powered anomaly detection in manufacturing or intelligent assistants in construction—driving real, measurable results.”
Two major components of this will be enhancements to Acumatica Labs as well as the release of Acumatica AI Studio. Acumatica Labs will include a new customer preview program that enables early access to new features for testing and direct feedback, as well as advanced kitting, order orchestration, customer special orders, case closure notes, B2B ordering, document templates and AI-powered anomaly detection for those who sign up.
Meanwhile, Acumatica AI Studio—a new feature in the larger platform—will let businesses automate their workflows without having to code. Chief Technology Officer Mikhail Shchelkonogov, during his presentation, showed how he could use it to automate report production, using the example of support case reports. After their engineering staff helps a customer with a technical issue, they must take all the case activities, analyze them, and report on things like what the problem was, what the root cause of that problem was, and how it was fixed, among other things. This is a complicated multi-step process. But Shchelkonogov, with the AI Studio, created a single button that directs the AI to gather all the information from the support case and then send it to the large language model to produce the report itself. He noted the AI even knew he spent 4 hours and 15 minutes working on that particular support case.
He explained how he set up the button himself through the AI Prompt Editor that is part of the AI Studio. Effectively, the button activates a prompt he had already prepared which specified things such as the items he wanted to include in the closure notes, the format of the report itself, and additional information to be used to enrich the text (e.g. product descriptions from the Acumatica website.) He then tested the results, refined the prompt to his satisfaction and completed the automation.
“Number one, I did not write a single line of code to do that. Number two, it was very fast. Number three, think of how many actions I automated. Now you can take it and go to any screen in Acumatica, think of the scenario you want to implement, and do it by yourself,” said Shchelkonogov.
The AI Studio also provides data-driven insights in a secure environment. For example, during his presentation Doug Johnson, vice president of solution architecture, raised the example of an Alaskan company that makes scratch off lottery tickets. The insights feature combed through hundreds of thousands of records to find which of their salespeople were discounting too heavily, which were selling below margin and other performance statistics. They also used it to determine who was overdue with their bills (Johnson noted that billing can be challenging in Alaska due to mail delays, so standard patterns won’t work). They were able to find this information by entering a simple data query, which gathered the information and put it on a dashboard “so instead of 100,000 or a million records, you only have to look at 15.”
“Another thing here is the [AI determined] average days to pay. It varies wildly by customer. That is what AI really helps with, so they can focus on the right problem instead of focusing on people who just have mail issues at their place,” he said.
Acumatica also announced several industry-specific solutions for the distribution, manufacturing, construction, retail and professional services industries. For professional services, Acumatica plans to implement a native
At this time, Acumatica hasn’t shared specific release dates for these updates.
Senate Finance Committee chairman Mike Crapo. R-Idaho, and ranking member Ron Wyden, D-Oregon, issued a
The
“As the tax filing season gets underway, this draft legislation suggests practical ways to improve the taxpayer experience,” Crapo and Wyden said in a joint statement. “These adjustments to the laws governing IRS procedure are designed to facilitate communication between the agency and taxpayers, streamline processes for tax compliance and disputes and ensure taxpayers have access to timely expert assistance.”
The discussion draft includes policies that would:
- Require the IRS to improve “math error” notices so that taxpayers are better positioned to timely respond to them;
- Streamline review of offers-in-compromise to facilitate the taxpayers’ resolution of tax debts;
- Simplify foreign bank account report (FBAR) compliance so that fewer taxpayers will fail to file key forms;
- Clarify and expand Tax Court jurisdiction so that more taxpayers can pursue their claims in an appropriate venue;
- Expand the independence of the National Taxpayer Advocate (NTA) from the IRS;
- Increase civil and criminal penalties on tax professionals that deliberately take actions to harm their clients;
- Expand taxpayer access to the IRS Independent Office of Appeals;
- Extend the so-called “mailbox rule” to electronic submissions so that taxpayers have certainty their materials are submitted on time;
- Protect taxpayers by adopting reasonable standards and due process for issuing and revoking return Preparer Tax Identification Numbers, or PTINs;
- Strengthen the IRS whistleblower program while protecting the confidentiality of taxpayer information;
- Protect hostages from unfair tax processes and penalties.
The proposals in the discussion draft reflect in many ways nonpartisan legislative proposals recommended by the National Taxpayer Advocate, along with standalone tax administrative bills introduced by congressional members. The provisions aim to reduce or eliminate challenges faced by taxpayers and other stakeholders within the current federal tax administrative system.
“This bipartisan draft bill, several years in the making, would significantly strengthen taxpayer rights in nearly every facet of tax administration,” said National Taxpayer Advocate Erin Collins in a statement. “I encourage taxpayers and the tax professional community to carefully review the draft and provide feedback to refine it, and I encourage Congress to prioritize the passage of this common sense bill to ensure stronger protections for taxpayers and a more fair and transparent tax system.”
The AICPA expressed its support Thursday for the discussion draft, and said it strongly supports and endorses the following provisions found in the Taxpayer Assistance and Service Act:
- Sec. 101. Scanning and Digitization of Tax Returns and Correspondence.
- Sec. 102. Establishment of Dashboard to Inform Taxpayers of Backlogs and Wait Times.
- Sec. 103. Expansion of Electronic Access to Information about Refunds.
- Sec. 104. Expansion of Callback Technology and Online Accounts.
- Sec. 105. Improvement of Notices of Math or Clerical Error.
- Sec. 108. Individuals Facing Economic Hardships Informed of Collection Alternatives.
- Sec. 112. Postponement of Certain Deadlines by Reason of Disasters Made Applicable to Limitation on Credit or Refund.
- Sec. 116. Modification of Rules for Postponing Certain Deadlines by Reason of Disaster.
- Sec. 405. Operations to Assist Taxpayers Experiencing Hardships During a Lapse in Appropriation.
- Sec. 504. Authority to Deny, Revoke, or Suspend Preparer Tax Identification Numbers.
- Sec. 903. Quarterly Installments for Estimated Income Tax Payments by Individuals.
- Sec. 904. Establishment of a Failure-to-Pay Penalty Safe Harbor for Individuals.
- Sec. 905. Extension of Mailbox Rule to Electronic Submissions and Payments.
“We are grateful to Senators Wyden and Crapo for putting together a thoughtful package that will provide much-needed support to taxpayers,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement. “When passed, the TAS Act will be one of the most significant tax packages we will have seen in recent years. It will be instrumental in establishing a foundation that helps simplify some of the laborious tax filing processes and allows taxpayers to better meet their tax obligations. We look forward to working with Senators Wyden and Crapo as this discussion draft moves forward.”
The Government Accountability Office released a
OpenAI in talks to raise up to $40 billion at $340 billion valuation
New Stampli procure-to-pay touts “conversation-first” approach
Acumatica announces AI Studio, new AI Lab customer feedback features
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
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