The Internal Revenue Service and the Treasury Department are giving investment brokers more time to report information on transactions involving digital assets such as cryptocurrency.
They announced Friday that brokers are not required to report additional information with respect to dispositions of digital assets until final regulations are issued under Sections 6045 and 6045A of the Tax Code.
Last year’s bipartisan Infrastructure Investment and Jobs Act amended Sections 6045 and 6045A to clarify and expand the rules for reporting of information on digital assets by brokers. However, brokers are still required to comply with existing laws and regulations. Further details can be found in Announcement 2023-2, posted Friday on IRS.gov.
The Treasury and the IRS noted the transitional guidance only applies to information returns filed or furnished by brokers. In contrast, taxpayers still need to report any income they receive from transactions involving digital assets. They are also required to answer the digital asset question on Page 1 of either Form 1040 or Form 1040-SR. See the instructions to these forms for details.
Under the infrastructure act, brokers were required to furnish reports to their customers and the IRS on transfers of digital assets on a Form 1099-B as a way to deter tax evasion. During the negotiations last year over the legislation, lobbyists for crypto companies had tried to weaken the rules and have it apply to fewer of them. However, given the turmoil over the past year in the crypto industry, with high-profile exchanges going bankrupt, a delay in reporting is understandable.
According to the announcement, brokers are required to furnish payee statements to customers by Feb. 15 of the year following the calendar year of the sale. Brokers must file information returns on Form 1099-B, “Proceeds From Broker and Barter Exchange Transactions,” with the IRS by February 28 (or March 31 if filing electronically) of the year following the calendar year of the sale. The existing regulations under Section 6045 don’t specifically address the extent to which these requirements apply to sales or exchanges of digital assets and do not specifically include digital assets as a specified security subject to basis reporting, the IRS noted.