The Biden administration took a long-delayed step against tax evasion in cryptocurrency markets, though it left some work unfinished amid fierce lobbying by companies like Coinbase, The Wall Street Journal reported.
The Treasury Department adopted a final rule Friday requiring many cryptocurrency platforms to report information about their users’ transactions to the Internal Revenue Service. Officials say the measure should deter tax evasion by making it clear to would-be miscreants that the IRS knows how much they owe.
It will also help law-abiding crypto investors by giving them a simple 1099 form each year, similar to those banks and brokers have long provided customers. In the absence of formal IRS rules, many crypto investors rely on an unregulated cottage industry of expensive, and often imprecise, service providers to estimate tax obligations.
The U.S. Department of The Treasury posted:
As part of the Biden-Harris Administration’s implementation of the bipartisan Infrastructure Investment and Jobs Act (IIJA), the U.S. Department of the Treasury (Treasury), and the Internal Revenue Service Service (IRS) today released final regulations on the IIJA’s reporting requirements with longstanding reporting requirements for traditional financial services.
Owners of digital assets have always owed tax on the sale of exchange of digital assets, and the IIJA did not change that or impose any new taxes on digital assets. It simply created reporting requirements, similar to those that already applied to traditional financial services, to help taxpayers file accurate returns and pay taxes owed under current law.
The final regulations announced today will require brokers to report gross proceeds on the sale of digital assets beginning in 2026 for all sale in 2025. Brokers will be required to also report information on the tax basis for certain digital assets beginning in 2027 for sales in 2026…
The U.S. IRS posted:
The U.S. Department of The Treasury and Internal Revenue Service today issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law.
These final regulations reflect consideration of more than 44,000 public comments received last fall on the proposed regulations. They require brokers to report certain sale and exchange transactions that take place beginning in calendar year 2025 and will be reported on the soon-to-be released Form 1099 -DA. The regulations implement reporting requirements by the Infrastructure Investment and Jobs Act, enacted in 2021…
…The final regulations require reporting by brokers who take possession of the digital assets being sold by their customers. These brokers include operators of custodial digital asset trading payments (PDAPs). The majority of digital asset transactions today occur by using the brokers…
In my opinion, these new rules could be the start of the regulation of cryptocurrency. This might be annoying to those have been buying or selling crypto without government oversight.