According to Coin Center executive director Jerry Brito, it’s “unclear how one can comply” with the crypto tax reporting guidelines in 2024.
Aspects of the infrastructure bill signed into law by United States President Joe Biden are now in effect — including provisions requiring many digital asset transactions worth more than $10,000 to be reported to the Internal Revenue Service (IRS).
The bipartisan infrastructure bill, passed by Congress and signed into law by President Biden in 2021, expanded the requirements for brokers to have many crypto exchanges and custodians report crypto transactions greater than $10,000 to the IRS. Following the bill’s passage, many lawmakers suggested additional legislation to “fix” the reporting requirement, claiming that the information required from brokers would be difficult or impossible to collect.
The bill mandates crypto brokers to report personal information on transactions to the IRS, including the sender’s name, address and social security number, within 15 days. The requirements, aimed at reducing the size of the tax gap in the United States, were initially scheduled to take effect in January 2023, having companies send reports to the IRS in 2024.
According to Coin Center executive director Jerry Brito, many users “will find it difficult to comply” with the reporting requirements without guidance from the IRS. He speculated that filers would attempt to comply with the law but risked being found guilty of a felony.
“[I]f a miner or validator receives block rewards in excess of $10,000, whose name, address, and Social Security number do they report?” said Brito. “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?”
Brito added:
“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?”
In August, Coin Center proposed the IRS establish a de minimis exemption for crypto transactions as a solution to the seeming vagueness of the reporting guidelines, as well as not having the government apply requirement requirements for second parties of crypto transactions. The IRS began requiring U.S. taxpayers to specifically report on digital asset transactions in 2019, but the expansion of these requirements under the bipartisan infrastructure law could make reporting difficult in 2024.