Crypto Exchanges Under IRS Watch: New Treasury Proposal Demands Detailed Transaction Reports

Cryptocurrency exchanges are on IRS radar, according to CNBC. Detailed transaction reports are required by a new Treasury proposal.

The US Treasury Department has recently published a proposed rule requiring cryptocurrency brokers, including exchanges and payment processors, to report user information regarding sales and exchanges of digital assets to the Internal Revenue Service (IRS). 

The move is part of a larger push by Congress and regulatory agencies to combat tax avoidance in the cryptocurrency industry. The new rule seeks to make tax reporting for cryptocurrency users simpler while imposing the same information reporting requirements on brokers of digital assets as they do on brokers in conventional financial markets.

New tax reporting form: Form 1099-DA

The proposed rule introduces a new tax reporting form called Form 1099-DA, which would assist taxpayers in determining their tax liabilities. The form intends to reduce the “complexities” involved with computing gains by giving thorough information on users’ cryptocurrency transactions.

Per the report, the US Treasury Department believes that this streamlined approach will help individuals meet their tax obligations more efficiently.

Cryptocurrency is subject to reporting requirements

According to the proposed rule, a “broker” would include centralized and decentralized cryptocurrency trading platforms, cryptocurrency payment processors, and particular online wallets that store digital assets. This strategy makes sure that a wide range of organizations that facilitate Bitcoin transactions are subject to the reporting obligations. 

The rule would cover popular cryptocurrencies such as:

• Bitcoin (BTC)
• Ethereum (ETH)
• as well as non-fungible tokens (NFTs)

The proposed rule expands reporting requirements for cash transactions exceeding $10,000 to digital assets in addition to aligning reporting requirements for cryptocurrency brokers with those for brokers in traditional financial markets, such as stocks and bonds. 

Reduce tax evasion

The Biden administration claims that these steps are intended to increase openness and lessen the possibility of tax evasion inside the ecosystem of digital assets.

The proposed rule results from the $1 trillion Infrastructure Investment and Jobs Act passed in 2021, which aimed to bolster tax reporting requirements for digital asset brokers. 

The legislation mandated the IRS to define qualifying crypto brokers and provide forms and instructions for reporting. It was estimated that these new rules could generate approximately $28 billion in additional tax revenue over the next decade.

If implemented, the proposed rule would become effective for brokers starting from 2025, for the subsequent 2026 tax filing season. The Treasury Department and the IRS are currently soliciting feedback on the proposal until October 30 and have scheduled public hearings on November 7-8 to gather additional stakeholder input.

More information about new IRS regulation crypto exchange?

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Source: CNBC