A client once told me that he invested in cryptocurrency — Bitcoin primarily — to save for the future effectively with some level of privacy. And he isn't the only one out there.
For all of those crypto-investors, however, that level of privacy looks to be a thing of the past.
This past month the U.S. Senate passed its version of Congress's 2021 infrastructure bill, but attached to the bill is something else. It includes several new reporting rules for digital assets, which includes cryptocurrency accounts. Specifically, the bill seeks to impose the same information reporting requirements on digital assets. The bill also seeks to update the definition of "broker" to include persons responsible for "regularly providing any service effectuating transfers of digital assets on behalf of another person." Finally, the bill imposes Form 1099-B and cost-basis reporting obligations.
The House of Representatives has also gotten into it. They have the Senate's bill before them, and are considering it. Should the bill pass in its current form, the crypto industry won't be the same, as the broad definition of "broker" may cover unintended targets. Certain House representatives, however, have proposed amendments to the infrastructure bill, specifically to address the cryptocurrency provisions. Should the House pass its own version of the bill, we will need to wait for reconciliation to finish before we know the bill's final form.
This means that the legal "gray zone" that many cryptocurrency companies operated in is going away. Even if the House amendments get adopted in the final bill, information reporting is here for crypto accounts.
If you don't like the idea of this information reporting and you are considering moving your crypto abroad, then know that you may have your own information reporting obligation if you do. Foreign-held cryptocurrency investment accounts may need to be included on international information reporting forms, like the FBAR and form 8938.
Foreign or domestic, your cryptocurrency reporting needs to be handled properly. Contact us to get your information reporting and income reporting for your crypto done right.
–The IRS Medic Team