IRS extends digital asset broker relief through 2027 under Notice 2025-33

ARTICLE | June 26, 2025

Authored by RSM US LLP

Executive summary

In Notice 2025-33, the IRS extended prior transitional relief for brokers subject to the digital asset reporting regime under section 6045. Building on Notice 2024-56, the latest guidance provides brokers additional time to implement withholding systems, comply with Tax Identification Number (TIN) collection rules and classify legacy foreign customers under the new broker information reporting requirements. The IRS recognized that broker systems remain under development, and that operational barriers still exist in preparing for full compliance with Form 1099-DA information reporting and withholding regulations.

Notice 2025-33 delays the effective date of backup withholding obligations to Jan. 1, 2027, permits reliance on uncertified TINs for pre-2026 accounts if verified through the IRS TIN Matching Program, extends foreign exemption classification for legacy non-U.S. customers and confirms the continued availability of value-based withholding thresholds in digital asset-for-asset exchange transactions.

The IRS has not changed the effective date of Form 1099-DA reporting for gross proceeds, which begins in 2025. Brokers must continue preparing for full reporting compliance while using the extension period to solidify data pipelines, update know-your-customer and TIN certification protocols and manage recordkeeping and valuation for in-kind payments.

Background: Section 6045 and final regulations

Final regulations under section 6045, issued in 2024, require custodial brokers to report gross proceeds from digital asset sales on new Form 1099-DA for transactions occurring on or after Jan. 1, 2025. Beginning in 2026, certain brokers will also be required to report adjusted basis for covered digital assets. To complement these requirements, section 3406 imposes backup withholding obligations when a customer fails to provide a certified TIN or is flagged by the IRS for a mismatched TIN/name combination. Brokers that withhold tax must report those amounts on Form 945 and furnish appropriate payee statements. The IRS first provided transitional relief in Notice 2024-56. Notice 2025-33 extends and modifies that relief to help brokers complete system builds before the rules are fully enforced.

Key provisions of Notice 2025-33

The IRS has extended the deferral of backup withholding obligations for digital asset sales through calendar year 2026. This means brokers will not be required to apply 24% backup withholding under section 3406 until Jan. 1, 2027. Brokers may also continue using uncertified TINs for preexisting accounts, those opened prior to Jan.1, 2026, through the end of 2027, so long as the broker uses the IRS TIN Matching Program and receives a match prior to executing a transaction.

Additionally, brokers may treat certain pre-2026 accounts as belonging to exempt foreign persons for purposes of reporting and withholding in 2027. This treatment applies where the account has never been classified as a U.S. person and the broker’s files reflect a non-U.S. address. For such accounts, brokers will not be penalized for failing to file Form 1099-DA, failing to withhold backup tax, or failing to report on Form 945. For brokers involved in digital asset-for-digital asset exchanges, the IRS has also extended the rule, allowing the withholding amount to be capped at the proceeds of a liquidation of 24% of the received assets. This relief is important because token values may change between the time of a transaction and the moment they are liquidated for withholding purposes. The IRS also continues to waive penalties under sections 6651 and 6656 for underpayment resulting from this timing gap, provided brokers comply with the liquidation-based methodology described in the notice.

All relief provisions are effective for sales occurring on or after Jan. 1, 2025, and apply through the end of calendar year 2027, depending on the specific rule.

Looking ahead

TIN matching is no longer optional and is now a baseline expectation. Brokers relying on uncertified or legacy taxpayer identifiers must integrate TIN matching functionality into onboarding and pre-trade workflows. Similarly, while brokers may rely on documentation and address history to treat certain accounts as foreign, this relief is narrowly tailored and does not constitute a blanket exemption.

The IRS’ temporary relief for in-kind payments also underscores its recognition of the unique challenges in token valuation and withholding.

As digital asset reporting continues to evolve under close regulatory scrutiny, the operational bar is rising. At RSM US, our digital asset tax professionals are monitoring these developments closely and are ready to help you navigate the path to full compliance.

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