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Treasury/IRS Propose Cryptocurrency Tax Reporting Rules

By NAIFA on 9/15/23 1:59 PM

Topics: Taxes IRS

On August 29, Treasury/the Internal Revenue Service (IRS) proposed rules expanding tax reporting of cryptocurrency transactions. Generally, the proposed rules would require cryptocurrency exchanges to disclose detailed information on their clients’ transactions starting in 2026.

The proposed rule requires crypto brokers (generally, entities that facilitate the buying and selling of digital assets) to track and report such key information as capital gains and losses (under rules similar to those applicable to stock and bond brokers, Treasury said). The reporting is to start in 2026. Among the transactions that would have to be reported are gross proceeds for sales of digital assets as of January 1, 2025. As of January 1, 2026, adjusted basis reporting would be required.

The proposed rule is posted at https://public-inspection.federalregister.gov/2023-17565.pdf. Comments on it are due by October 30. If taxpayers request it, Treasury/IRS will hold a hearing on the proposal November 7. If needed, the hearing will extend to November 8, Treasury said.

Prospects: Regulations governing tax liability on transactions involving cryptocurrency have been anticipated for a long time, with the need made more urgent by the revenue-raising provision calling for more reporting that was enacted in 2021. Initial reaction to the proposed rules has been mixed, with some calling the proposal “misguided,” or “confusing,” and others saying the rules do not go far enough. It is likely that comments and the hearing, if it happens, will result in modifications to the proposed rules before they are finalized.

NAIFA Staff Contact: Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org.