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New U.S. Law on Crypto Tax Reporting Comes into Force

A new tax legislation, the Infrastructure Investment & Jobs Act, ratified in late 2021, now requires individuals or businesses obtaining at least $10,000 in crypto during their commercial activities to submit a report to the Internal Revenue Service (IRS), according to insights from Coin Center, a nonprofit organization dedicated to exploring and advocating public policy aspects of cryptocurrency.

Jerry Brito, the executive director of Coin Center, elucidated in a recent blog post that the report should contain essential details such as the person’s name, address, social security number, received amount and specifics about the transaction’s date as well as its nature. The legislative provision took effect at the beginning of this year, placing all U.S. citizens under its purview. Failure to furnish the requisite report within 15 days of the transaction may lead to felony charges.

Brito highlighted the urgency of compliance while underscoring the ambiguity surrounding the execution of such compliance at present. Despite Coin Center’s legal challenge against the constitutionality of the law in June 2022, the case remains pending in the courts, leaving individuals with an obligation to adhere to the regulation.

Brito elucidated potential hurdles individuals might face in adhering to the new regulations. For example, validators or miners who are recipients of block rewards in excess of $10,000 are faced with the dilemma of reporting personal information. Similarly, those participating in on-chain decentralized exchanges and receiving $10,000 in cryptocurrency encounter ambiguity in reporting requirements.

The executive director raised concerns about donations made anonymously in cryptocurrencies, such as Bitcoin or ether. He questions how recipients should identify anonymous donors in public addresses. The Treasury Department, as of now, has not provided answers to these crucial questions.

Brito further spotlighted the lack of guidance from the IRS on these matters, including the lack of an official form issued by the Treasury Department for purposes of reporting crypto transactions. He noted the IRS’s failure to address questions related to cryptocurrency reporting on Form 8300, traditionally used for reporting cash transactions. Despite cryptocurrency now being recognized as a kind of “cash,” as per the law, no established method for reporting it on Form 8300 currently exists.

Adding to the complexity, Brito clarified that the legislation extends its reach to both businesses as well as individuals, dispelling the notion that only businesses are subject to compliance. However, the delineation of what constitutes “trade or business” remains vague, lacking clear guidance from the Treasury Department.

Crypto companies such as Bit Mining Ltd. (NYSE: BTCM) will be watching for any additional details about this new law that the Treasury Department provides over the coming months.

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