Aug 19 Cryptocurrency Reporting Delays
There are growing indications that cryptocurrency has become too big for tax authorities to ignore. The numbers are notable: At the end of 2021, it was estimated that there were more than 68 million crypto wallet holders in the United States alone (more than 108 million globally), and around 2,300 US businesses accepted Bitcoin. Enterprises are using them to transact business. Consumers and retailers are increasingly comfortable with digital assets, and now governments and people are looking for greater clarity on how their transactions should be taxed and reported.
If you are looking for some guidance on cryptocurrency reporting, buckle up for delays and bumpy rides ahead. Under a law passed by Congress last November, it would have required the crypto firms to begin collecting clients’ transactions information, including customer names, addresses, gross proceeds from the sale, and capital gains and losses. Treasury said collecting such information can significantly increase the compliance rates. Such data would help make the compliance process standardized and easier for those who want to comply, and the IRS catches the tax cheats.
However, some new developments suggest the Biden administration is poised to delay the reporting requirements for Crypto firms. The Treasury Department and IRS are likely to push off the target date of January 2023. While the laws and regulations are looming, the industry executives have urged the Treasury Department to extend the January 2023 deadline for compliance. The biggest US Exchange firm, Coinbase Global Inc., stated that the infrastructure and software programs needed to be in place to collect the required data could take as long as two years.
The Treasury and the IRS are also working on a new form called 1099-DA, which Crypto firms will use to report above mentioned required data. This form will be different from the 1099-B, which is used for the Stocks and Bonds reporting. The IRS considers cryptocurrency to be property. Therefore cryptocurrency gains and losses must be reported on income tax returns.
Despite the delays by the federal government and the recent “Crypto Winter” setting in, two state agencies: Colorado and Utah, have introduced programs that will permit individuals and businesses to remit taxes using popular cryptocurrencies, i.e., Bitcoin and Ether. While these two states are making headway, almost all other states have receded their thoughts of introducing similar programs due to the high volatility and recent down-turn of the cryptocurrencies that have erased billions of dollars in market capitalizations. Although, this has not stopped the young investors and lobbyists from campaigning for pro-crypto policies. The state lawmakers continue to debate bringing cryptocurrencies into their states’ commercial codes. Still, we have yet to see which states will follow suit and pass the bills to accept cryptocurrencies. Stay tuned for more updates.
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