On Tuesday, August 10, 2021 the U.S. Senate passed the Infrastructure Investment and Jobs Act bill, HR 3684. It would subject cryptocurrency to information reporting on Form 1099-B and impose related cost basis reporting requirements on brokers. The bill also modifies the definition of a broker in an attempt to include certain persons who (for compensation) are involved in digital asset transfers. Related reporting of transfers between brokers would apply to cryptocurrency under expanded rules that are not restricted to transactions involving cash. Additionally, the bill subjects cryptocurrency transactions to cash reporting on Form 8300 (relating to cash received in a trade or business). Existing penalties of $250 per information return, up to a total of $3,000,000 (and corresponding penalties for failing to provide copies of the returns to taxpayers), can be assessed for missing or incorrect information for certain types of existing information returns, subject to potential reduction based on amount of gross receipts, issuer correction, and certain de minimis errors and potential increase for intentional disregard. These penalties would apply to the expanded information reporting for digital assets included in the bill. The bill would also add the new digital asset information reporting to the list of information returns in Sec. 6724(d)(1)(A) eligible for relief from certain penalties where errors in reporting are due to reasonable cause. The changes set forth in the bill would generally subject digital assets acquired on or after January 1, 2023 to the cost basis rules applying to digital assets and require tax reporting to the IRS beginning on or after January 1, 2024. The provisions relating to cryptocurrency remain controversial, and have been the subject of widely reported efforts to amend the bill. Despite an agreement in principle to amend the provision, the Senate bill ultimately passed without amendment.
There will likely be continuing efforts to modify the provision. Monitoring the legislation for any related changes is highly recommended.