IRS extends deadline on crypto broker reporting and withholding

The Treasury Department and the Internal Revenue Service are giving cryptocurrency brokers additional time to comply with requirements to report on digital asset sales and withhold taxes.

In Notice 2025-33, they extended and modified the transition relief provided last year in Notice 2024-56 for brokers who are required to file Form 1099-DA, Digital Asset Proceeds From Broker Transactions 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, furnish payee statements, and backup withhold on certain transactions starting Jan. 1, 2025. The IRS also announced in Notice 2024-56 transition relief from penalties related to information reporting and backup withholding tax liability required by these final regulations for transactions effected during 2025. Notice 2024-56 also provided limited transition relief from backup withholding tax liability for transactions effected in 2026.

The IRS said it has received and carefully considered comments from the public about the transition relief provided in Notice 2024-56 indicating that brokers needed more time to comply with the reporting requirements; today's notice addresses those comments.

In the new Notice 2025-33, the Treasury and the IRS extended 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 Trump administration has been notably more supportive of the crypto industry since taking office, relaxing guidance at the Securities and Exchange Commission as well.

The notice also extends the limited transition relief from backup withholding tax liability for an extra year. That means brokers won't 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 to the IRS's TIN Matching Program and receives a response that the name and TIN combination matches IRS records. They're also granting 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, and the broker immediately liquidates the withheld digital assets for cash.

This notice also includes more transition relief for brokers for sales of digital assets effected during calendar year 2027 for certain customers that haven't been previously classified by the broker as U.S. persons.