The IRS's AI-powered oversight of cryptocurrency transactions, including the introduction of Form 1099-DA, has led to concerns about privacy and civil liberties.
The Internal Revenue Service (IRS) is enhancing its oversight of cryptocurrency transactions through the use of artificial intelligence (AI). In a groundbreaking move, the IRS released a draft of Form 1099-DA for Digital Asset Proceeds From Broker Transactions, signaling a significant step forward in the enforcement of crypto tax compliance.
This development aligns with the agency’s proposed regulations introduced last year, aimed at refining the reporting of digital asset sales and exchanges by brokers. The regulations stipulate that beginning January 1, 2025, brokers, encompassing digital asset trading platforms and payment processors, must report these transactions to the IRS using the newly unveiled form.
Furthermore, the reporting requirements extend to real estate transactions, with relevant entities expected to disclose digital asset dispositions and fair market values in real estate dealings starting January 1, 2025.
In a separate but related revelation, the House Committee has initiated an inquiry into the IRS’s use of AI for scrutinizing Americans’ financial data, expressing concerns over potential infringements on civil liberties. The Committee, led by Chairman Jim Jordan (R-OH) and Rep. Harriet Hageman (R-WY), investigates allegations of the IRS deploying AI without proper legal procedures to monitor private transactions and financial accounts.
Additionally, this inquiry follows reports of IRS officials utilizing AI to target taxpayers’ bank accounts without warrants. These allegations, unveiled by investigative journalism, suggest the IRS can access bank data broadly, raising questions about privacy and the scope of governmental oversight.
