Infrastructure Bill Heads to President Biden for Signature—Cryptocurrency Reporting Requirements Included
In August we published an article discussing the Senate infrastructure bill and its potential implications for cryptocurrency investors. The House passed its version of the bill on November 5; and, despite the cryptocurrency industry’s concerns about the Senate bill’s language, the House bill keeps it intact. Here, Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what President Biden’s signature of the law will mean for cryptocurrency investors.
Congress Aims to Target a Few Issues with Its New Cryptocurrency Reporting Requirements
One of the controversial aspects of the infrastructure bill is its imposition of a requirement for “brokers” to report cryptocurrency sales that mirror stockbrokers' existing requirements to report their customers’ securities transactions. Although cryptocurrency industry advocates have not objected to a reporting requirement in principle (for the most part), they have taken particular issue with the bill’s definition of a “broker.”
While industry advocates argue that the bill’s definition is overly broad (encompassing exchanges that may not have the information they need in order to comply), in Congress, both parties have argued that a broad-based reporting requirement is necessary for a few reasons. The goals served by the infrastructure bill’s cryptocurrency reporting requirement include:
- Increasing transparency (and thus integrity) in the cryptocurrency markets
- Providing greater federal oversight of the cryptocurrency markets
- Enhancing revenue collection from cryptocurrency investors
Congress estimates that the bill’s reporting requirements will lead to the collection of an additional $28 billion in federal revenue over the next eight years. The Internal Revenue Service (IRS) has already begun devoting additional resources to enforcing cryptocurrency tax compliance, and it will gain even more resources to support its collection efforts once the bill gets signed into law.
Cryptocurrency Investors Will Also Have Reporting Requirements
In addition to the “broker” reporting requirement, the infrastructure bill also establishes a reporting requirement for cryptocurrency investors. The bill amends Section 6050I of the Internal Revenue Code (IRC), which requires reporting of cash transactions of $10,000 or more, to also require reporting of cryptocurrency transactions exceeding this threshold.
As summarized by CoinDesk, this law “requires recipients to verify the sender’s personal information and record their Social Security number, the nature of the transaction and other information, and report the transaction to the government within 15 days,” under applicable circumstances. But, similar to “brokers,” cryptocurrency investors generally will not have access to the information they need to comply. This puts cryptocurrency investors in a difficult spot—especially since violating 6050I can be prosecuted as a felony offense.
What are cryptocurrency investors to do? The infrastructure bill’s, and potentially the cryptocurrency industry’s, saving grace may be the bill’s provision which leaves it to the U.S. Treasury Department to interpret the new reporting requirements and provide guidance. Once the bill becomes law, the next step will be to see what the Treasury Department does—and when.
Contact Washington D.C. Tax Attorney Kevin E. Thorn for Assistance
If you have questions about your federal tax obligations as a cryptocurrency investor, we encourage you to get in touch. To request an appointment with Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 202-349-4033, email firstname.lastname@example.org or contact us online today.