A new crypto tax reporting law took effect on January 1st, 2024. The law requires US citizens to report digital asset transactions worth over $10,000 to the IRS within 15 days.
Part of an infrastructure bill President Joe Biden signed into law has taken effect. This includes a provision that digital transactions over $10,000 be reported to the US Internal Revenue Service (IRS).
Crypto Transfers Over $10,000 Must Be Reported to IRS
New tax reporting measures welcomed US Crypto users on January 1, 2024. Aspects of the Infrastructure Investment and Jobs Act, including a provision to the Tax Code, have taken effect. The Biden administration passed the bill in 2021, which proposed new tax compliance measures.
The Tax Code requires any entity that receives $10,000 or more in cryptocurrency as part of their business or trade to report the transaction to the IRS. Proposed by the Treasury in May 2021, the measure was set to take effect in 2023 but was delayed. According to the proposal, businesses, including banks, payment platforms and crypto exchanges, must submit a report to the IRS when receiving crypto transfers worth $10,000 or more.
In a blog post, Jerry Brito, Executive Director at Coin Center, explained the new obligations and identified some issues accompanying them. Brito noted the report must include details such as the name, address, and social security number of the person who sent the funds, the amount received, and the date and nature of the transaction. He added failing to file a report with the IRS within 15 days of receiving the funds may constitute a felony offence.
Self-Executing Law
Coin Center’s executive director also explained that it is a “self-executing law.” This means “there is no requirement for any additional regulatory action or implementation by a government agency for it to be enforced.” Brito further detailed that it became immediately operational and enforceable on its effective date once it was passed and signed into law.
“Unclear How to Comply”
One of Brito’s main issues with the law is that users “will find it difficult to comply” with the reporting requirement without guidance from the IRS.
Brito suggested a lack of clarity around the law will cause many problems.
He commented:
“[I]f a miner or validator receives block rewards in excess of $10,000, whose name, address, and Social Security number do they report?”
Adding;
“If you engage in an on-chain decentralized exchange of crypto for crypto and you therefore receive $10,000 in cryptocurrency, who do you report? And by what standard should you measure whether an amount of a particular cryptocurrency is equivalent to more than $10,000?”
He further questioned:
“The really tricky nature of this requirement will become clear when someone makes such a donation, but does so anonymously by simply sending us Bitcoin or Ether to our public addresses. Who could we possibly list as the sender in that case?”
Numerous Proposed Crypto Tax Measures
The Treasury Department and the IRS spent much of 2023 conjuring up new ways to tax the industry. In August, the Treasury proposed new tax reporting mechanisms under which crypto brokers, including exchange and payment processors, would have to report additional information on users’ crypto transactions to the IRS.
Weeks before the Treasury introduced its proposed tax reporting measures, the IRS declared US crypto investors must include staking rewards as part of their gross income. According to the revenue agency’s directive, staking rewards become subject to income tax within the US the moment they are in the taxpayer’s possession.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Source: https://cryptodaily.co.uk/2024/01/us-crypto-tax-law-transactions-over-10k-must-be-reported-to-irs-within-15-days