The enforcement of a requirement for brokers to report gains made by crypto investors has been postponed by the U.S. Treasury Department and the IRS. The new tax rules, incorporated into the $1 trillion infrastructure bill passed by the U.S. Congress in 2021, were to be imposed in 2023.
Crypto Brokers Told to Comply With Existing Laws Until Final Regulations Are Issued
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) are delaying an obligation for digital asset brokers to start tracking and reporting proceeds from customer transactions. The respective provision was introduced with the Infrastructure Investment and Jobs Act, which was signed into law in late 2021, and was scheduled to enter into force on Jan. 1, 2023.
The main purpose of the requirement, imposing on the crypto sector the regulations that currently apply to securities brokers, was to increase tax revenues from coin trading by revealing gains from such operations in a 1099 form.
However, additional rules are needed to enforce the legislation, including defining the scope of the term “broker” — critics have pointed out that it’s currently too wide and covers entities such as miners that may not be able to comply with the regulations.
On Friday, the Treasury and the IRS provided transitional guidance on the matter. The announcement stated that crypto brokers will not be expected to report additional information with respect to dispositions of digital assets until final regulations are adopted and noted:
Brokers are still required to comply with existing laws and regulations.
The authorities also emphasized that the guidance applies only to returns filed by brokers while taxpayers still need to report any income received from transactions involving cryptocurrencies. “They are also required to answer the digital asset question on page 1 of either Form 1040PDF or Form 1040-SRPDF,” the notice detailed.
In another announcement released on Dec. 23, the IRS also said it’s delaying new rules requiring third-party settlement organizations, such as Paypal, Venmo, Cash App, and other digital wallets, to report transactions exceeding $600 until next tax year.
The new minimum threshold, lowered from the previous one of more than 200 transactions per year, was enacted with the American Rescue Plan of 2021. It was initially supposed to apply to transactions that occurred in the calendar year 2022, which is now considered a “transition period.”