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Cryptogambling / IRS postpones $10k digital asset reporting regulation

IRS postpones $10k digital asset reporting regulation

Publish Date: 18/01/2024
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The U.S. Internal Revenue Service (IRS) and Treasury Department announced on Tuesday a delay in the regulation requiring businesses to report the receipt of digital transactions over $10,000.

“Businesses… do not have to report the receipt of digital assets the same way as they must report the receipt of cash until Treasury and IRS issue regulations,” the IRS and the Treasury Department said in a joint statement. “This particular provision requires Treasury and the IRS to issue regulations before it goes into effect.”

This decision followed changes made to the Infrastructure Investment and Jobs Act (IIJ Act) by the U.S. Treasury Department and the IRS.

The crypto community had earlier raised concerns about a new reporting rule starting on January 1, under the Infrastructure Investment and Jobs Act signed in November 2021. The regulation requires that businesses report digital assets payments of $10,000 or more, including single transactions and related transactions exceeding the $10,000 threshold.

Detailed information is required for each reported transaction. This includes the sender’s name, address and taxpayer identification number. Additionally, details such as the transaction’s amount, date and nature must be provided.

In the cryptocurrency world, collecting all this information may be challenging due to the decentralized nature of the blockchain. For instance, NFT artists often receive payments from anonymous individuals, and in such cases, the artist may only have information about the sender’s anonymous wallet address.

The regulation specifies that digital asset reports must be submitted within 15 days of the transaction using Form 8300, titled “Report of Cash Payments Over $10,000 Received in a Trade or Business.”

Challenges in complying with new rules

Coin Center executive director Jerry Brito highlighted that many individuals would face challenges complying with the reporting requirements unless they receive additional guidance from the IRS.

Digital assets are treated as cash under Section 6050I of the Act, but currently, it does not affect U.S. cryptocurrency users.

According to the details of the new rule, any individual receiving over $10,000 worth of digital in the course of “trade or business” is required to report identifying information about the payer, mirroring regulations long applied to cash transactions.

“IRS states 6050I–a problematic provision of the infrastructure bill requiring reporting digital asset transactions over $10K–isn’t effective until there’s more rulemaking. A positive step forward given its impossibility and breadth of reporting required,” said the Blockchain Association in a social media post.

Tax and policy experts recommend staying calm, saying that the law is unlikely to apply to most crypto investors and NFT flippers. Additionally, they emphasize that the statute is not currently in effect and could be months, or even years, away from actual enforcement.

Jason Schwartz, a tax partner and crypto specialist at law firm Fried Frank, said that there are things that will need to be resolved regarding the new rules.

“But I don’t think that people should really be hand-wringing, because it’s fairly clear that the IRS is of the view that none of this applies just yet,” Schwartz said.

Regarding the situation, the Treasury and IRS plan to issue additional proposed regulations to outline the steps for digital asset reporting.

“Treasury and the IRS intend to issue proposed regulations to provide additional information and procedures for reporting the receipt of digital assets, giving the public an opportunity to comment both in writing and, if requested, at a public hearing,” they said in a joint statement.

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