U.S. delays crypto tax reporting rules, as it still can’t define what a ‘broker’ is
Congress passed a law in November 2021 that required the new crypto rules to be issued.
A key set of crypto tax reporting rules is being delayed until further notice under a decision made by the United States Treasury Department. The rules were supposed to be effective in the 2023 tax filing year, in accordance with the Infrastructure Investment and Jobs Act passed in November, 2021.
The new law requires that the Internal Revenue Service (IRS) develop a standard definition of what a “cryptocurrency broker” is, and any business that falls under this definition is required to issue a Form 1099-B to every customer detailing their profits and losses from trades. It also requires these firms to provide this same information to the IRS so that it will be aware of customers’ incomes from trading.
However, more than 12 months have passed since the infrastructure bill became law, but the IRS has still not published a definition of what a “crypto broker” is or created standard forms for these firms to use in making the reports.
In a Dec. 23 statement, the Treasury Department says that it intends to craft such rules soon, as it explains:
“The Department of the Treasury (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 broker reporting […] After careful consideration of all public comments received and all testimony at the public hearing, final regulations will be published.”
In the meantime, the department says that brokers will not be required to comply with the new crypto tax provisions, stating:
“Brokers will not be required to report or furnish additional information with respect to dispositions of digital assets under section 6045, or issue 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 be required to comply with the crypto tax provisions.
The crypto tax provisions have been controversial within the blockchain industry ever since they were first proposed. Critics have argued that the broad definition of “broker” under the law could be used to attack Bitcoin miners, who will likely be unable to comply with reporting provisions.