The IRS has implemented new tax reporting requirements for investors and users of cryptocurrency. Taxpayers must now check a box on their tax returns to indicate if they received or disposed of digital assets, and report all income related to these transactions. Brokers are now required to report cryptocurrency transactions to the IRS and investors on Form 1099-B. Cash reporting rules for cryptocurrency payments of $10,000 or more have also been extended. These changes apply to transactions in 2023 and beyond. 1. The 2021 legislation expands the definition of “brokers” to include businesses that regularly provide services for transferring digital assets, requiring them to furnish Forms 1099-B to customers and the IRS.
2. Cryptocurrency exchanges/platforms will need to gather customer information and report digital asset transactions, including names, addresses, phone numbers, gross proceeds, and capital gains or losses.
3. It is not yet known whether exchanges/platforms will have to file Form 1099-B or a new IRS form for reporting digital assets.
4. Businesses receiving $10,000 or more in cash, including digital assets, must report the transaction to the IRS using Form 8300, including the identity of the person from whom the cash was received.
5. Current reporting rules for cash transactions will now apply to digital asset transactions, requiring businesses to collect information such as address, occupation, and taxpayer identification number.
6. Cryptocurrency exchanges/platforms may begin collecting Form W-9 from customers and tracking holding periods and buy-and-sell prices of digital assets in customers’ accounts to comply with reporting rules.
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