In line with its ongoing efforts to track US citizens’ crypto assets, on January 1, the Internal Revenue Service (IRS) introduced new reporting requirements for cryptocurrency transactions.
On top of existing IRS bureaucracy, US-based businesses and individuals must now tell the agency every time they receive a crypto transaction valued at $10,000 or more. And if the report isn’t filed within 15 days of receiving the transaction, they could be found guilty of a felony offense. However, while the new tax rules technically came into force on Monday, a lack of guidelines from the IRS has left many traders and investors confused.
The latest changes to the tax code were enabled by the Infrastructure Investment and Jobs Act, which Congress passed in November 2021.
In a bid to crack down on money laundering, the new rules apply to both cash and crypto transactions. Regardless of the nature of the payment, for every cash or crypto transaction of $10,000, recipients need to collect identifying information regarding the source the funds, including the name, address and tax identification number of the business or individual from whom the payment originated.
The IRS Expects US Citizens to Fill This Form for Transactions of $10k or More. Another Clear Attempt to Discourage US Citizens from Investing in Crypto. Most People Won’t Be Able to Fill That Form Without an Expert 😤
This information must then be shared with the IRS and the Financial Crimes Enforcement Network (FinCEN) by filling out an 8300 form for each applicable transaction.
For a business such as a cryptocurrency exchange, the new rules aren’t much different from existing anti-money laundering regulations, simply adding another layer of paperwork to a process they already carry out.
But for others, the new rules pose a number of questions. For example, how are crypto miners and users of decentralized exchanges meant to report the source of funds using identifying data like street addresses and social security numbers?
So far, the government has been silent on these questions, leaving critics of the new rules frustrated.
Moreover, while countries around the world are increasingly legislating to empower law enforcement in the battle against the illegal use of cryptocurrencies, civil liberties advocates have argued that the new IRS rules are unconstitutional and a major blow to Americans’ rights.
Although all US taxpayers are technically now subject to the IRS’ new rules, their implementation could be delayed or even abandoned, depending on the outcome of an ongoing legal challenge brought by the crypto advocacy group Coin Center.
When it initially filed the suit in 2022, Coin Center called the provisions in the Infrastructure Investment and Jobs Act “an affront to our civil liberties” and “a clear overreach for the government to force citizens to spy on each other without a warrant.”