Starting from this year, new rules from the U.S. Internal Revenue Service (IRS) are kicking in, affecting how crypto transactions are reported. These changes come as part of the infrastructure bill that President Joe Biden signed into law back in 2021. The main takeaway? If you’re dealing with digital asset transactions over $10,000, you need to report them to the IRS.
This rule was one of the key components of the bipartisan infrastructure bill. It requires crypto exchanges and custodians to report transactions exceeding $10,000. The idea is to close the tax gap in the U.S. by keeping better tabs on these transactions. However, some lawmakers believe that gathering the needed information from brokers might be a tough task.
Under this bill, crypto brokers have to report the sender’s personal details to the IRS, including their name, address, and social security number, and they have only 15 days to do this. Originally set to start in January 2023, the reporting will now begin in earnest in 2024.
Jerry Brito, the executive director of Coin Center, pointed out the challenges many users might face in complying with these new requirements. There’s a risk of being charged with a felony if the rules aren’t followed correctly. Brito raises practical concerns too. For example, in cases like mining or decentralized crypto exchanges, it’s unclear whose details should be reported when the transaction value exceeds $10,000.
The confusion doesn’t end there. Brito also highlighted the dilemma faced when anonymous donations are made in cryptocurrencies like Bitcoin or Ether. Who do you report as the sender in such cases? Coin Center proposed to the IRS to introduce a minimum exemption limit for crypto transactions, to ease the complexity of these new reporting guidelines. They also suggested that the government shouldn’t impose these rules on second parties in crypto transactions.
Remember, the IRS started requiring U.S. taxpayers to report digital asset transactions back in 2019. But with these new rules under the infrastructure law, 2024’s reporting landscape looks set to be a bit more challenging for those dealing with significant crypto transactions.
