IRS extends transition relief for digital-asset broker backup withholding and reporting

What changed

Treasury and the IRS extended specified transition relief for brokers implementing Form 1099-DA reporting and backup withholding, including broad backup-withholding relief for 2026 transactions and conditional 2027 relief. The notice does not eliminate customers’ income-reporting or basis obligations.

Who it affects

• Digital-asset brokers and custodial platforms
• Advisers coordinating client tax records and transfer workflows
• Clients disposing of digital assets

What is still open

• Broker implementation quality and handling of transferred or noncovered assets
• Future guidance for transactions and participants covered by temporary relief

What it means for an advisor

• Prepare for mismatches between broker-reported proceeds, client basis records, and wallet histories
• Explain that withholding relief does not excuse client gain, loss, income, or recordkeeping obligations

Previous interpretation

Notice 2024-56 supplied the earlier, narrower transition framework before this extension and modification.