Effective January 1, 2024, new crypto tax reporting obligations have been implemented as part of the Infrastructure Investment and Jobs Act passed by Congress in November 2021. These new obligations require that any receipt of cryptocurrency transactions totaling $10,000 or more must be reported to the IRS within 15 days. Non-compliance with this rule is considered a felony.
This new requirement is cumulative, meaning that multiple transactions that together amount to $10,000 cannot avoid the reporting rule. The challenge for crypto holders is the lack of a clear process for compliance. The current IRS form for cash transactions does not directly apply to cryptocurrencies, leading to unresolved questions about reporting specifics.
One such question pertains to transactions involving block rewards. It’s unclear how recipients of these rewards should report them, particularly in terms of identifying the sender.
Coin Center, a nonprofit organization focusing on cryptocurrency policy issues, has challenged this amendment in federal court. You can read more about their efforts here. While the case is currently under appeal, the obligation for immediate compliance remains, despite the existing uncertainties about the process.
This development represents a significant change in the treatment of digital assets under U.S. tax law, particularly regarding the application of traditional financial regulations to cryptocurrency transactions.
The implications of these updates to the tax code are evolving and we will continue to keep you updated as the facts evolve.
