An important set of crypto tax reporting rules is being postponed until further notice under a decision by the US Treasury Department. The rules would go into effect in the 2023 tax filing year, in line with the Infrastructure Investment and Jobs Act passed in November 2021.
The new law requires the Internal Revenue Service (IRS) to develop a standard definition of what constitutes a “cryptocurrency broker,” and any company that falls under this definition must issue a Form 1099-B to each customer detailing their profits and losing trade. It also requires these companies to provide the same information to the IRS so that it knows about clients’ earnings from trading.
However, more than 12 months have passed since the infrastructure bill became law, but the IRS still has not published a definition of what constitutes a “crypto broker” or created standard forms for these companies to use in making the reports.
In a December 23 statement, the Treasury Department says it plans to draft such rules soon, explaining:
“The Treasury Department and the IRS intend to implement section 80603 of the Infrastructure Act by publishing regulations specifically addressing the application of sections 6045 and 6045A to digital assets and providing forms and instructions for reporting by brokers. […] After careful consideration of all public comments received and all testimony at the public hearing, the final rules will be published.”
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In the meantime, the department says brokers are under no obligation to comply with the new crypto tax provisions, stating:
“Brokers will not be required to report or provide any additional information related to sales of digital assets under section 6045, or make additional statements under section 6045A, or file any returns with the IRS on transfers of digital assets under section 6045A(d) until those new final regulations under sections 6045 and 6045A are issued.
However, taxpayers (customers) will still need to comply with the crypto tax provisions.
The crypto tax provisions have been controversial within the blockchain industry since they were first proposed. Critics have argued that the broad definition of “broker” could be used under the law to attack Bitcoin miners, who are unlikely to be able to comply with reporting regulations.