In addition to its primary purpose, the Infrastructure Investment and Jobs Act (the “Act”), enacted on November 15, 2021, also contains a few tax provisions, notably Section 80603 regarding reporting requirements for cryptocurrency.
Cryptocurrency is covered under the new definition of a “digital asset” under Internal Revenue Code § 6045(g)(3), making cryptocurrency subject to the new rules applicable to digital assets.
The Act expands the definition of a “broker” to include a person who provides services effectuating transfers of digital assets on behalf of another person in exchange for consideration. “Specified securities” have also been extended to encompass digital assets that are acquired beginning in 2023. Thus, brokers of cryptocurrency will now be subject to the new reporting requirements for digital asset transactions similar to the existing reporting requirements for other specified securities, such as stocks, bonds, commodities, debt instruments, etc. For taxpayers who currently receive Form 1099-B reporting their stock sales, your digital asset transactions would now be reported to you in a similar manner. Furthermore, brokers are also now subject to reporting requirements for transfers of digital assets from accounts they maintain to other accounts that the broker knows or has reason to know is a broker, even though the account is not maintained by nor is the address associated with a broker. As a result, this could make transfers between personal wallets on exchanges subject to reporting requirements.
The current Form 8300 reporting requirements for businesses receiving cash in excess of $10,000 in one transaction or two or more related transactions now also apply to receipts of digital assets in excess of $10,000 beginning for returns required to be filed after December 31, 2023.
Failure to comply with many of these new rules could result in civil and/or criminal penalties.
We now await further guidance from the Treasury Department and IRS implementing these reporting requirements. In the meantime, there are still concerns about Section 80603 of the Act being overly broad and how it will work from a practical perspective. New legislation has even been introduced since the Act’s enactment to narrow and even repeal the cryptocurrency-related provisions of the Act.
If you need help navigating the new reporting requirements for cryptocurrency, please reach out to Maggie Simonson, Barry Sackett , or your Goosmann attorney.
The tax laws discussed herein have been summarized and should not be relied upon for compliance with the Internal Revenue Code or any federal or state tax laws.
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