IRS brings back old tax thresholds for reporting digital assets in 2025

In the United States, the IRS is issuing drafts of tax forms for 2026, including an updated version of Form W-9, which collects taxpayer identification information. A significant change is that sole proprietors must now provide their Social Security Number, while disregarded entities should submit the owner’s taxpayer identification number, regardless of having an EIN. This clarifies the reporting duties for taxpayers. Furthermore, the reinstatement of the $20,000 and 200 transactions thresholds for Form 1099-K is a notable development. This change reflects the IRS's decision to revert to previous reporting standards that were altered by the American Rescue Plan Act of 2021. As a result of these adjustments, it applies to the 2025 tax year. The IRS has also outlined continued processes for reporting income from digital assets, with new Form 1099-DA requiring certain brokers involved in these transactions to provide necessary information. Despite reversals of the “DeFi Broker Rule,” digital asset owners remain liable for taxes on sales and exchanges. All these reporting changes emphasize the importance of proper identification and reporting for tax compliance, as transactions not covered by W-2 forms will now require additional oversight through Form W-9 and Form 1099-DA. Taxpayers who refuse to submit a W-9 may face backup withholding at a flat rate of 24%. This enforcement highlights the IRS's intent to ensure taxation principles apply uniformly regardless of the economic landscape as digital finance evolves. Tax forms like the W-9 play a crucial role in enabling the IRS to ensure individuals appropriately report their income, thus strengthening the tax system overall.