On November 15th, 2021, President Biden signed the Infrastructure Investment and Jobs Act into law. Contained within this act are certain provisions regarding information reporting for digital assets
One of the focuses of the IRS over the past two years has been to increase the reporting of cryptocurrency transactions. You may have noticed a new question on schedule 1 of your 2019 tax return asking if you “received, sold, sent, exchanged or otherwise acquired any virtual currency”. This question then made its way to the top of page 1 of your 2020, 1040 tax return. Even with the inclusion of this question, cryptocurrency transactions were still not properly being reported to the IRS.

First, the Infrastructure Bill amends IRC §6045, requiring “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person” (defined as a “broker”) to report digital asset transactions cost basis and sales proceeds on Form 1099-B in a similar fashion to other “specified securities.” The Infrastructure Bill defines a digital asset as “… any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.” This means cryptocurrency will now be subject to the same reporting requirements as stocks and bonds. Failure to report crypto transactions could result in a $280 penalty per customer, with a maximum penalty of $3 million.

Second, the Infrastructure Bill also amends IRC §6050I. Section 6050I requires any person engaging in a trade or business that receives more than $10,000 in cash (in one transaction or two or more related transactions) to file a Form 8300. Form 8300 reports the payer’s name, address, and taxpayer identification number, among other items, to the IRS. Under the new provisions in the Infrastructure Bill, digital assets are now considered cash, and as such, crypto transactions in excess of $10,000 must be reported on Form 8300. For example, this means businesses that accept virtual currency as payment may now be required to report transactions above $10,000 to the IRS. Failure to file Form 8300 could result in civil consequences and felony charges.

These amendments are effective for transactions beginning January 1, 2023, with reporting requirements kicking in as of January 1, 2024.

To combat the burden of individuals trying to track their own cryptocurrency transactions each year, the Infrastructure Investment and Jobs Act (“The Act”) requires cryptocurrency brokers to furnish the information of its users to the IRS. The name, address, gross proceeds, and other information will be required to be reported by each broker beginning January 1, 2023.

Also included in The Act are additional reporting requirements for Broker-to-Broker transfers of cryptocurrencies. Brokers are required to furnish the information of any transfer of cryptocurrency during a calendar year under Code Sec. 6045A(a).

The last provision clarifies that any digital asset is included in the reporting requirements of Code Sec. 6050I(a). This will provide additional information to the IRS from businesses that receive more than $10,000 in one or more related transactions in the form of digital assets.