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.
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.