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US Treasury and IRS finalize crypto tax reporting rules for brokers

US Treasury and IRS finalize crypto tax reporting rules for brokers

Cryptopolitan2024/06/29 20:01
By:By Collins J. Okoth

Share link:In this post: The US Treasury and Internal Revenue Service released final regulations governing crypto brokers and their tax reporting requirements. The IRS finalized the regulations after going through over 44,000 public comments to understand the main concerns aired. The new regulations aim to tighten the tax compliance of crypto-based services and reduce cases of tax evasion from investors.Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any

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. 

Also read: Ethereum ETF and Solana ETF Could Crush ETH and SOL’s Price, Investors Look Into RCOF  

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.

Also read: 40% of South Korean university students are interested in crypto investing, study finds  

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.”

Acting Assistant Secretary for Tax Policy Aviva Aron-Dine

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

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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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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