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.
Corporate Consolidation and Antitrust Issues in Mergers
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Corporate Transactions: Best Practices for Successful Deals
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
How to Conduct a Fair and Legal Employee Termination in 2025
Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]
Admin Dissolution for Annual Report: What You Need to Know
While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]
Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]
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!
