The Treasury Department and Internal Revenue Service have announced that brokers will not be required to report additional information with respect to dispositions of digital assets until final regulations are issued.
According to IRS Announcement 2023-2, brokers are still required to comply with existing laws and regulations and that this transitional guidance applies only to information returns filed or furnished by brokers.
“Brokers will not be required to report or furnish additional information with respect to dispositions of digital assets under section 6045, or issue additional statements under section 6045A, or file any returns with the IRS on transfers of digital assets under section 6045A(d) until those new final regulations under sections 6045 and 6045A are issued,” the announcement states.
Meanwhile, until Treasury and IRS issue new final regulations pursuant to section 80603 of the Infrastructure Investment and Jobs Act under IRC section 6045, a broker may report gross proceeds and basis as required under existing law and regulations as of Dec. 23, 2022. Additionally, until the agencies issue new final regulations under section 6045A, a broker may furnish statements on transfers of covered securities as required under existing law and regulations as of Dec. 23, 2022.
In contrast, taxpayers are still required 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.
Background
The Infrastructure Investment and Jobs Act enacted in November 2021 amended Internal Revenue Code (IRC) sections 6045 and 6045A to clarify and expand the rules regarding the reporting of information on digital assets by brokers. Among other things, the reporting requirements were expanded to include “digital assets,” including cryptocurrency. It also defined digital assets as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the [Treasury] Secretary.”
Digital assets include but are not limited to:
- Convertible virtual currency and cryptocurrency;
- Stablecoins; and
- Non-fungible tokens (NFTs).
The definition of “broker” was also modified to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” In addition, broker-to-broker reporting requirements were expanded to make clear that transfers of digital assets are included. The legislation also added digital assets to existing rules requiring businesses to report cash payments of more than $10,000.
These amendments apply to returns required to be filed and statements required to be furnished after Dec. 31, 2023.
Treasury and IRS intend to publish regulations specifically addressing the application of sections 6045 and 6045A to digital assets and providing forms and instructions for broker reporting, the announcement further notes. A notice of proposed rulemaking will be published that seeks public comments on the forthcoming proposal and announces a public hearing.
For more information, including a set of frequently-asked questions, visit the IRS’s Digital Assets page.
