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Crypto Exchanges Now Required to Report Transactions to IRS

As part of the Infrastructure Bill’s legislation, there is a requirement for crypto exchanges to report information to the IRS about its crypto and NFT transactions and investors.

Now that the IRS will be tracking crypto investments, whether you are a trader, miner, developer, or a broker it is critical that you immediately maintain clean and accurate records and hire a tax professional to properly report your transactions to remain in compliance with the IRS.

In fact, the IRS recently reported that 93% of all seizures by its Criminal Investigations team involved cryptocurrencies. Increased enforcement action of the crypto and NFT community is almost certain to continue with the new reporting requirement as part of the Infrastructure Bill.

Learn more about Kugelman Law crypto and NFT accounting and audit services.

Here are the highlights of the new rules impacting the crypto and NFT community effective January 2024:

  • Brokers/exchanges will be required to report 1099-B forms to the IRS showing gains as well as names and addresses of its customers. Customers must then report their activity on their tax return and ensure it matches what the exchange reports or else risk triggering an audit.
  • This will likely create inaccuracies and reporting issues since exchanges will have an incomplete view into what an investor’s cost basis and holdings are, such as what may be in DeFi applications or self-custody wallets. 
  • While there already is a reporting requirement for individuals who receive gifts in value of $10,000 or more per year as part of the U.S. tax code, the new law expands that reporting to digital assets. Recipients, including businesses and exchanges, who receive more than $10,000 in cryptocurrency will have to report that transaction along with the payer’s personal information, including their social security number.
  • NFTs and other digital assets that generate more than $10,000 may also have to be reported to the IRS.

If you own a crypto or NFT business entity, then Kugelman Law accountants and attorneys can help with third-party reporting requirements and also institute policies and procedures to help ensure your business remains in compliance and off the IRS radar.

Our tax professionals are experienced with recreating missing trading data and dealing with high volume and complex trading activity. Let our team of experienced California cryptocurrency attorneys and tax professionals bring you into compliance or defend you in your audit.

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Alexander helped me break down my tax situation and used his expertise to figure out the next actionable steps, make sure that all the bases were covered (that I wasn't aware even existed), and confirm that things were done correctly. If you are confused and stuck in a difficult tax situation, Alexander will guide you forward and help you confidently resolve the issue. Henry Wang
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If you are having tax trouble, Alexander is the one to help you. He was very professional, personable, and easy to reach. His explanation of the entire process is helpful for easing the stress that is associated with tax trouble. We never felt intimidated or out of the loop while working with him. The process was handled to our liking and we are satisfied with the results. Even the after care has been phenomenal! Tony W.
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If anyone out there is in need of stellar legal tax assistance, look no further and contact Alexander Kugelman. He helped me tremendously with my tax situation and is always there to help when needed. If I can give Alexander more stars, I would because 5 stars is not enough! Thank you for everything, Alex!!! Flo Lauzon
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Alexander has been a life saver! I got dragged into some serious IRS issues with a complicated foreign assignment component, which included divorce. Alexander has been working with me to resolve directly with the IRS. Alexander is detail oriented, responsive and I trust him to guide me. I will be using Alexander for all tax related matters from now on! He is stuck with me forever. Eve T.
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Alexander helped me understand the IRS audit process and prepared my response. There were certain records that I had lost, but he suggested alternatives that the IRS accepted. Even better, he showed up at the audit for me and I never actually had to talk with the IRS. I didn't have to pay any penalties. I'd definitely recommend hiring Alexander to deal with an IRS issue. L.R.