ComplianceNovember 15, 2021

New cryptocurrency regulatory reporting changes – Five key areas of focus

By: Stevie D. ConlonAnna VayserRobert Schwaba
The Infrastructure Act signed into law by President Biden requires IRS Form 1099-B gross proceeds and cost basis tax reporting for U.S. sales of digital assets including cryptocurrencies, effective beginning for returns required to be filed in 2024.

Here are five aspects of the new rule that we recommend that you focus on:

1) The definition of digital assets subject to tax reporting is potentially very broad and likely includes NFTs (which may surprise market participants).

2) There can be different types of tax reporting rules depending on the tax classification of a digital asset, ETF or option, and some digital assets are already subject to Form 1099-B reporting because they constitute securities for such tax reporting purposes (such as ETFs, futures or options).

3) Potential treatment of various digital asset market participants as brokers is controversial and important details need to be worked out.

4) A new type of tax return will apply to certain digital asset transfers by brokers to non-brokers. More to come.

And 5) Organizational actions that impact a holder’s basis in a digital asset will be reportable by issuers (although it is unclear who is classified as an “issuer”).

We are continuing to assess the new provision and plan to provide updates.

Please complete the form below to request more information.

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