Crypto Tax Reporting

There's a distinctive question on the front page of form 1040 U.S individual tax return asking "at any time during the tax year, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency". The IRS first introduced the question related to virtual currency on Schedule 1 of Form 1040 for the tax year 2019. Ever since the same question about virtual currency appears on the front page of the form 1040 below the section of taxpayer's personal information.

The Department of the Treasury and the IRS provided guidelines on information reporting obligations for digital asset brokers. In 2024, the Department of Treasury and the IRS released final regulations [TD10000] and established comprehensive tax reporting requirements for digital asset brokers. These new regulations apply to all crypto exchanges and OKX is required to follow these new regulations starting calendar year 2025.

Effective Date and Timeline

• Form 1099-DA (new form for digital assets) for transactions starting January 1, 2025

  • Digital asset brokers are required to report gross proceeds from digital asset disposition on Form 1099-DA for users who have reportable transaction starting January 1, 2025. Gross proceeds from digital asset disposition refer to the total amount received from selling or exchanging cryptocurrency. Along with gross proceeds, the Form 1099-DA also includes date of transaction, digital asset type, short term or long tern gain /loss (if known), cost basis (if available), etc. A simple illustration on how this form works: Let's say UserXYZ on the OKX exchange platform bought 0.1 BTC for $1,000 on 1/1/2025 with a transaction fee of $10 and later on sold 0.1 BTC on 1/2/2025 for $1,500. A form 1099-DA will be issued to UserXYZ from OKX and a copy of the 1099-DA will be shared with the IRS. The 1099-DA form will include the following information: gross proceeds "$1,500", date acquired "1/1/2025", date disposed "1/2/2025", digital asset type "BTC", gain or loss "short term capital gain (less than 1 year of holding)", cost basis "$1,010", etc. UserXYZ will likely have a short term capital gain of $490 from the disposition of 0.1 BTC, which is reportable on 2025 1040 U.S individual tax return. Even though OKX may have users' cost basis, it's not required to report on Form 1099-DA cost basis information for transactions that occur in the 2025 calendar year.

• Form 1099-DA cost basis reporting for "covered securities" transactions starting January 1, 2026

  • In addition to gross proceeds reporting, digital asset brokers are required to report cost basis on "covered securities" from digital asset dispositions on Form 1099-DA for users who have reportable transactions starting January 1, 2026. This requirement applies to dispositions of digital assets that are classified as "covered securities"; cost basis must be reported on Form 1099-DA. Dispositions of digital assets that are classified as "noncovered securities"; cost basis might not be reported on Form 1099-DA.

• Form W-9 and form W-8 collection starting tax year 2026

  • Starting calendar year 2026, OKX is required to collect form W-9 and form W-8 from OKX US users on the U.S. exchange platform.

    • Form W-9 is collected from OKX US users who are considered U.S. Persons.

    • Form W-8 is collected from OKX US users who are considered Non U.S. Persons.

  • These forms are collected to ensure proper and correct reporting of users' information and reportable transactions to the IRS. Users on the OKX US exchange platform who do not provide proper and correct form will be presumed subject to backup withholding beginning on January 1, 2027. Please make sure to provide OKX with up-to-date and accurate tax information and tax forms for your OKX account.