On Monday November 15, 2021 President Joe Biden signed into law the $1 trillion dollar Infrastructure Investment and Jobs Act (“ACT”). The wide-ranging bill includes funding roads, broadband access and public transit are provisions that could greatly increase the complexity and risk related to tax reporting for cryptocurrency.
Expansion of Brokerage Reporting
In an effort to increase compliance and transparency in the Crypto markets, the act requires brokers to report customers basis, holding period, and gain/loss on the sale of exchange of digital assets. This requirement is effective for digital assets acquired on or after January 1, 2023 for reports to be filed after December 31, 2023.
Relatedly, the act requires a broker, upon a transfer to another broker, to provide the information necessary for the recipient broker to fulfill it reporting requirement upon subsequent sale. Therefore, broker to broker transfers will require reporting of basis and holding period information. Similarly, this is for assets acquired after January 1, 2023, for reports to be filed after December 31, 2023.
Treatment as Cash for Reporting Purposes
The United States government has required that cash transactions of more than $10,000 received by someone conducted by a trade or business be reported to government for a long time. The Infrastructure bill expands the definition of cash for these purposes to include digital assets such as cryptocurrency. As such, businesses that accept cryptocurrency may be required to gather and report additional information from their customers in order to fulfill their reporting obligation.
Participants within the crypto community are already pushing for standalone bills and cryptocurrency friendly regulation in order to reduce the obligations and risk the Infrastructure bill creates for cryptocurrency users.