HomeCryptoThe US is delaying tax reporting rules on cryptocurrencies, as it is not yet able to define what a “broker” is.
The US is delaying tax reporting rules on cryptocurrencies, as it is not yet able to define what a “broker” is.
December 23, 2022
A key set of cryptocurrency tax reporting rules have been deferred until further notice based on a decision by the US Department of the Treasury. The rules were expected to be effective in the 2023 tax return year, in accordance 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 a “cryptocurrency broker” is, and any firm that falls under this definition is required to issue a Form 1099-B to every client detailing their profits and losses from trade. It also requires these firms to provide the same information to the IRS so that it is aware of clients’ income from trading.
However, it’s been more than 12 months since the infrastructure bill became law, yet the IRS has yet to publish a definition of what a “cryptocurrency broker” is or create standard forms for these firms to use to draft relationships.
In a Dec. 23 statement, the Treasury Department said it plans to develop those rules soon, as it explains:
“The Department of the Treasury (Department of the Treasury) and the IRS intend to implement section 80603 of the Infrastructure Act by issuing regulations specifically addressing the application of sections 6045 and 6045A to digital assets and providing forms and instructions for reporting intermediaries […] After careful consideration of all public comments received and all testimony at the public hearing, the final rules will be released.
Related: US Senator Toomey Introduces Stablecoin Regulatory Bill
Meanwhile, the department says brokers won’t be required to comply with new cryptocurrency tax provisions, stating:
“Brokers will not be required to report or provide additional information regarding digital asset dispositions under section 6045, or make additional representations under section 6045A, or file with the IRS any representations about digital asset transfers under section section 6045A(d) until the new final regulations referred to in articles 6045 and 6045A are issued”.
However, taxpayers (customers) will still be required to comply with cryptocurrency tax provisions.
Crypto tax provisions have been controversial within the blockchain industry ever since they were first proposed. Critics have argued that the broad definition of a “broker” under the law could be used to attack Bitcoin miners, who likely won’t be able to comply with the reporting provisions.