The Biden administration seems poised to delay when it expects cryptocurrency brokers and exchanges to start reporting on their clients’ trading.
The U.S. Treasury Department and the Internal Revenue Service will likely be pushing back a January date from which firms must begin tracking data, such as customers’ capital gains and losses, according to a Bloomberg source. This would mean that the tax agency will have to wait longer than it would to receive similar data for stocks or bonds.
According to a law passed by Congress in November last year, crypto firms must begin recording their clients’ detailed transaction data in 2023. This would enable them to send reports to the IRS and investors the following year.
Once the date is finalized, exchanges and brokerages will be compelled to send detailed transaction data to the IRS. Clients will also receive personal data, which they can then use to file their taxes. The data would include information such as customer names and addresses, gross proceeds from sales, as well as any capital gains or losses.
Additionally, the Treasury and the IRS have developed a new form for crypto firms to use called the 1099-DA. This will be distinct from the 1099-B used by stock and bond brokers. The government plans to release a draft in the coming months.
Crypto tax
In spite of the recent market downturn, crypto tax evasion remains a major issue for Washington policymakers, with the Treasury and the IRS has struggled to quickly draft rules. Complaining that the legislation was drafted too broadly, industry executives have pushed back from the beginning.
With the prospect of these requirements looming, those executives are now saying they need more time to prepare. “Given the broad scope of the tax provisions, uncertainty around implementation, and the short timeline before these new rules are set to take effect, we encourage the Treasury Department to extend the deadline for compliance,” said Jake Chervinsky, head of policy at the Blockchain Association trade group.
Meanwhile, Coinbase Global Inc., the largest US exchange, believes that it could take the industry up to two years to comply. Amidst the crypto market turmoil, Coinbase laid off nearly one-fifth of its staff, even rescinding offers they had previously tendered.
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