FameEX Hot Topics | New US Cryptocurrency Tax Law Enacted: Transactions Over $10,000 Require IRS Reporting Within 15 Days

The U.S. witnessed a pivotal shift in cryptocurrency tax reporting with the enforcement of the Infrastructure Investment and Jobs Act from January 1, 2024. Passed in November 2021, this act requires any American receiving $10,000 or more in cryptocurrency through their trade or business to report it to the Internal Revenue Service (IRS) within a 15-day window. Coin Center, a notable crypto policy advocacy group, has warned that failing to comply could lead to felony charges.

This new mandate, as detailed by Coin Center, necessitates the provision of comprehensive details about the sender, including their name, address, and social security number, in addition to the transaction's amount, date, and nature. Jerry Brito, the Executive Director of Coin Center, has stressed the wide-ranging implications of this law, affecting not just businesses but also individuals, and the serious repercussions of non-compliance.

Despite Coin Center's ongoing legal challenge against the Treasury Department over the constitutionality of this law, Brito has underlined the immediate need for compliance. However, he also acknowledges the lack of clarity and guidance on how to comply, particularly in complex scenarios such as miners or validators receiving block rewards over $10,000 or the counterparties in decentralized crypto exchanges.

A major concern raised by Brito is the IRS's current lack of specific guidelines for reporting cryptocurrency transactions. The traditional 'cash' transactions are reported using Form 8300, but it's unclear how this applies to cryptocurrency, now legally categorized as 'cash.' Furthermore, the Financial Crimes Enforcement Network (FinCEN) does not have jurisdiction over cryptocurrency transactions, adding to the confusion.

The law’s reach extends beyond corporations, encompassing individuals involved in various crypto-related activities, such as mining, day trading, or NFT creation, regardless of their business structure. Brito highlights the vagueness surrounding what constitutes 'trade or business,' pointing to the Treasury’s failure to provide a definitive guideline.

This regulatory change signifies a major transition in the approach of the U.S. government towards cryptocurrency taxation. It presents both individuals and businesses in the crypto space with new challenges and uncertainties. The law underscores the pressing need for more explicit instructions and a deeper understanding of the intricacies involved in cryptocurrency transactions and their reporting, reflecting the evolving nature of digital finance and its intersection with regulatory frameworks.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.