Congress is hoping that tax revenue from cryptocurrency transactions will help fund infrastructure projects across the country...
Congress is hoping that tax revenue from cryptocurrency transactions will help fund infrastructure projects across the country. Under a controversial provision in the $1 trillion infrastructure bill approved by the U.S. Senate, cryptocurrency brokers will be subject to new tax-reporting requirements.
Increasing Oversight Over Cryptocurrency
As discussed in prior posts, the federal government is steadily increasing its oversight over cryptocurrency as it grows in popularity. The Internal Revenue Service (IRS) has led the charge, seeking to increase tax compliance around cryptocurrency transactions. In 2019, the IRS began sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.
In 2020, the IRS added a new section to Form 1040 that asks taxpayers to report capital gains and losses from crypto transactions. Earlier this year, the U.S. Department of Treasury released a report outlining the Biden Administration’s proposed tax compliance measures, which includes the requirement that crypto transactions exceeding $10,000 be reported to the IRS.
Cryptocurrency Provisions in Infrastructure Bill
The Infrastructure Investment and Jobs Act (H.R. 3684) seeks to increase the reporting of cryptocurrency transactions to the Internal Revenue Service (IRS), a move that is projected to raise $27.9 billion over the next ten years. The bill would specifically require cryptocurrency “brokers” to collect certain information from cryptocurrency account owners, such as their names, addresses, and tax identification numbers. Brokers would also be required to provide certain information to the IRS regarding a client’s sale of cryptocurrency, including identifying information about the seller and the amount recognized from the sale.
The proposed legislation is generating controversy because it expands the definition of “broker” under the U.S. Tax Code to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” While the definition is intended to capture cryptocurrency exchanges and other entities that facilitate cryptocurrency sales or transfers, the cryptocurrency industry has raised concerns that the broad definition will also sweep up cryptocurrency miners, software developers, and others who don’t have visibility to buyers and sellers.
While several amendments were proposed in the Senate, lawmakers were unable to reach a consensus on substitute language. As a result, the Infrastructure Investment and Jobs Act passed with the controversial cryptocurrency provision intact.
Should those efforts be unsuccessful, the U.S. Treasury will still have the opportunity to clarify the reporting requirements when enacting implementing regulations. As currently written, the new requirement wouldn’t take effect until 2024, which leaves a lot of time to solicit feedback and fine-tune the “broker” definition.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Teddy Eynon, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Why Every Business Should Conduct an Annual Insurance Coverage Review
Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)
Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Pet Trusts in New Jersey and New York: A Practical Estate Planning Tool
For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
