US Legislators Delays Crypto Tax Rules For Crypto Brokers

Key Points:

• The United States Treasury Department has decided to postpone further notice of a significant set of crypto tax reporting regulations.
• Crypto brokers don’t have to start reporting customers’ gains to IRS until the administration finishes writing the rules.
• Previously, the IRS has still not published a definition of what a “crypto broker” is or created standard forms for these firms to use in making Form 1099-B.

The United States Treasury Department postponed the original January 1 deadline for a crypto tax reform that had been opposed by crypto brokers and some members of Congress, requiring brokers to start tracking and reporting investors’ gains to the Internal Revenue Service.

The new rule mandates that the Internal Revenue Service (IRS) create a uniform definition of a crypto broker, and any company that satisfies this description must provide each client with a Form 1099-B that includes information on their trade gains and losses.

This information must also be given to the IRS so that it is informed of consumers’ trading incomes as part of the $1 trillion infrastructure bill that was enacted into law in 2021.

However, the IRS and the Treasury Department have not yet developed the regulations for applying the provision, leaving important issues unanswered. The new reporting obligations wouldn’t go into effect until the agencies had finished drafting the rules controlling them, according to statements made by the IRS and the Treasury on Friday:

“The Department of the Treasury (Treasury Department) and the IRS intend to implement section 80603 of the Infrastructure Act by publishing regulations specifically addressing the application of sections 6045 and 6045A to digital assets and providing forms and instructions for broker reporting. A notice of proposed rulemaking will be published that sets forth proposed regulatory text, explains the proposed rules, solicits public comments, and announces a public hearing. This process will allow the Treasury Department and the IRS to accept comments from affected taxpayers, industries, and other interested parties and enable the public to meaningfully participate in the regulatory process. After careful consideration of all public comments received and all testimony at the public hearing, final regulations will be published.”

The agency has stated that brokers will not be compelled to abide by the new crypto tax regulations in the meantime.

Following the demise of the exchange FTX and the arrest of its founder Sam Bankman-Fried, the Biden administration’s approach to regulating the bitcoin market has come under renewed criticism. The former CEO of FTX and colleagues were significant contributors to both political parties. They actively attempted to establish a legislative framework supportive of the sector, which has seen a significant decline in market value over the past year.

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Harold

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