Cryptocurrency has taken the world by storm, so much so that Congress included tax provisions regarding cryptocurrency in the Infrastructure Investment & Jobs Act. The Act is currently making its way through the legislative process, so these provisions aren't final. But it is important to be informed of the provisions so that taxpayers are prepared when the provisions do take effect.
Cryptocurrency Tax Provisions in the Infrastructure Investment & Jobs Act
The Act, if approved as currently written, would require brokers – broadly defined as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person” – to report cryptocurrency transactions to the Internal Revenue Service (IRS). Brokers would also be required to furnish written statements to their customers regarding transfers of covered securities, including digital assets like cryptocurrency, made on behalf of the customers.
Additionally, the Act would make changes to the reporting requirements for taxpayers. The Tax Code currently requires taxpayers to report business transactions of $10,000 or more in cash to the IRS. Under the Act, cryptocurrency would be treated as cash for reporting purposes.
Criticism of Cryptocurrency Provisions in Infrastructure Investment & Jobs Act
The Act's broad definition of “broker” is one of the Act's most controversial provisions because it encompasses validators (such as miners and stakers) and entities that sell crypto-related hardware or software.
Additionally, critics of the Act's cryptocurrency provisions fear that the Act would require miners, stakers, and hardware/software companies to report information that is impossible for those who use blockchain technologies to obtain. Some amendments have been proposed to clarify that the reporting requirements don't apply to miners and validators.
Talk to an Experienced Tax Attorney
The proposed provisions would take effect in 2023, pending final approval of the Act by Congress. If you have questions regarding the tax impact of cryptocurrency or other digital assets, contact an experienced tax attorney. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.