The Internal Revenue Service (IRS) has announced new reporting requirements for crypto transactions exceeding $10,000 in value.
This development stems from the bipartisan infrastructure bill signed by President Joe Biden in 2021. The bill, which is now effective, mandates that crypto brokers report detailed personal information on transactions above this threshold to the IRS.
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The information, which must be provided to the IRS, should include the sender's name, address, social security number and must be reported within 15 days of the transaction date.
Initially set to be enforced in January 2023, these requirements aim to narrow the tax gap in the United States. However, they have raised concerns among industry stakeholders.
Jerry Brito, the executive director of Coin Center, expressed worries about the practical challenges of compliance. He pointed out the complexities of reporting transactions, especially when dealing with decentralized exchanges and anonymous donations in cryptocurrencies like Bitcoin (BTC) or Ether (ETH).
Brito's concerns highlight the difficulties users and brokers might face in adhering to these regulations without specific guidance from the IRS.
Lawmakers have proposed additional bills to refine the reporting requirement, which they view as impractical. In response to these concerns, Coin Center suggested in August that the IRS should consider a de minimis exemption for smaller crypto transactions and avoid imposing second-party reporting requirements.
The IRS has been focusing on digital asset transactions since 2019, but the expanded requirements under the new law are set to make reporting more challenging for the crypto community in 2024.
This move by the IRS marks a significant step in regulating cryptocurrency markets and aims to enhance transparency and tax compliance. However, it also places a considerable burden on crypto users and exchanges, who must now navigate these new reporting requirements in an already complex regulatory landscape.
