The US Department of Treasury and the Internal Revenue Service (IRS) announced the final tax reporting requirements for crypto brokers on June 28. The rules apply to digital assets’ sales or exchanges handled by crypto services. The US Treasury mentioned these tax implementations as part of the bipartisan Infrastructure Investments and Jobs Act.
The Treasury and the IRS mentioned that the regulations only required reporting. The IRS assured that it did not impose new taxes on crypto businesses. Crypto brokers will now file Form 1099, similar to traditional investment firms. However, tax reporting for crypto brokers will be in a new version, Form 1099-DA, which is still being drafted.
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The released final regulations will apply to trading, digital asset kiosks, and hosted wallet services. The IRS delayed the rules for decentralized finance (DeFi) services, including decentralized exchanges and unhosted crypto wallets. The Treasury and IRS admitted that issues specific to non-custodial institutions needed more consideration.
The IRS mentioned that crypto brokers needed to start filing for their gross proceeds from 2026 for all sales or exchanges starting in 2025. Brokers also needed to report the cost basis of some of their customers’ assets starting in 2027 for 2026’s sales. New regulations will also reach real estate companies that receive payment for their goods and services in digital assets. All services will get this one year to adjust to the changes.
IRS provides clarity for crypto investors’ tax obligations
The IRS developed these final rules based on the public comments received on previous crypto tax regulations’ proposals. The Treasury Department reviewed over 44,000 comments for the process. In these comments, the main concern remained clarity around institutions within DeFi, such as privacy issues and stablecoins.
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The IRS also noted the use of crypto to cover up taxable income. However, the tax commission pointed out that tax-compliant crypto investors and brokers needed pricey third-party options to calculate returns.
“By implementing the law’s reporting requirements, these final regulations will help taxpayers more easily pay taxes owed under current law while reducing tax evasion by wealthy investors.”
The IRS admitted that the current regulations aimed to increase tax compliance among crypto businesses and investors and to increase investor clarity about their tax obligations. According to the IRS, crypto investors can easily file and review their returns through the new Form 1099-DA.
Consensys asks the IRS to postpone tax regulations
Just now, @Consensys commented on the #IRS's draft Form 1099-DA to provide our perspective that the information required under the proposed regulations and on the Draft Form is overly broad and imposes a costly compliance burden, particularly for a #blockchain software provider.… pic.twitter.com/B36XLhr1Qc
— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) June 20, 2024
The public reacted to these tax regulations’ proposals in November 2023. Many people in the industry were concerned that the Internal Revenue Service would treat crypto brokers like traditional brokers. Following these comments, Consensys asked the IRS on June 20 to postpone the tax regulations.
Bill Hughes, a lawyer at Consensys, mentioned that Form 1099-DA was ‘overly broad’ and imposed a “costly compliance burden.” According to the software development company, it would be crucial for the IRS to delay reporting requirements for companies similar to Consensys and some brokerage firms.
Cryptopolitan reporting by Collins J. Okoth
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