In Notice 2025-33, the IRS extended some transitional relief for digital asset brokers by one additional year, meaning no penalties will be imposed for an additional year related to the backup withholding requirements.
Under the final regulations adopted in 2024 (89 FR 56480), digital asset brokers are not only required to report digital asset sales on Form 1099-DA but also perform backup withholding.
The relief in Notice 2025-33 extends certain relief provided last year in Notice 2024-56, including:
- Extending through the 2026 tax year an exemption from backup withholding requirements generally; and
- Extending through 2027:
- The relief from backup withholding if the broker utilizes the IRS TIN Matching Program alternative procedure for obtaining taxpayer identification numbers (TINs) from preexisting customers who opened accounts prior to 2026;
- The ability to treat certain preexisting customers as exempt foreign persons based solely on non-U.S. addresses; and
- The ability to limit the amount of backup withholding in situations involving sales of digital assets for other digital assets.
The relief provided only applies to the backup withholding requirements. The broker reporting requirements remain unchanged. Brokers were required to file Form 1099-DA to report gross proceeds received from post-2024 sales of digital assets and will continue to be required to report the adjusted basis on certain digital assets after 2025 unless the sales are undertaken for a customer that is an exempt foreign person.
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