Last fall, Congress passed a law that would require crypto firms to report clients' transactions to the Internal Revenue Service (IRS). The reporting requirement, scheduled to go into effect in January 2023, would reduce crypto holders' ability to evade paying taxes on their holdings and transfers. It's estimated to result in an additional $28 billion in tax revenue over the next ten years. However, the crypto industry is a-buzz with rumors that the IRS may be delaying that requirement after all.
The new reporting law mirrors the existing requirements on banks, brokerages, and other financial institutions. At a minimum, expect that crypto companies will have to reveal customer names and addresses, gross proceeds from sales, capital gains, and losses.
However, since the law's passage, the crypto industry has argued that the proposed January timeline was unrealistic in terms of the companies' ability to deliver on the new requirement. Since its inception, part of the crypto's appeal is that it has been sold as a digital equivalent of cash—it's anonymous and supposedly outside of governmental control.
Crypto trades are less anonymous than holders thought, but it's still true the companies may need to change their software architecture to meet the new requirements. Coinbase, the largest crypto exchange, has estimated that it will need at least two years to rewrite its software to comply with the new law.
While the delay is still just a rumor (the IRS won't yet confirm it), industry watchers know that deadlines relating to other sections of the law have already been moved, so they're optimistic that a new reporting deadline will be announced soon.
If you have any potential tax liability for crypto holdings, don't interpret this to mean you should push dealing with this to the back burner. Instead, see this delay as a great time to be proactive—to resolve your issues in a thoughtful, planned way.
To get started, contact an attorney specializing in tax law today. 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.
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