The Internal Revenue Service (IRS) will not require US businesses to file reports on transactions exceeding $10,000 until it establishes a legal framework.
The IRS explained that the decision came after the U.S. Treasury Department and the IRS revised the Infrastructure Investment and Jobs Act (IIJ Act). Let’s explore more about it.
Implementation of Crypto Tax Rule Halted by IRS
The IRS and Treasury said in a joint statement: “Businesses… do not have to report the receipt of digital assets the same way as they must report the receipt of cash until Treasury and IRS issue regulations. This particular provision requires the Treasury and the IRS to issue regulations before it goes into effect.”
At the start of the year, the IRS enforced a new rule demanding crypto users report transactions exceeding the $10,000 limit. However, the regulator faced backlash from the crypto community. Many complained of a lack of guidelines from the IRS, which would make it difficult to comply.
IRS Pauses $10,000 Cryptocurrency Reporting Rule for Businesses
Only 15 days after a new law took effect, the nation’s tax agency is hitting the brakes on a digital currencies requirement impacting small business, crypto traders and nonprofits pic.twitter.com/PuqHeqnLBp— Julian Martinez (@Jbuscus123) January 17, 2024
When will this Law be implemented?
Although the new crypto tax law is theoretically due to take effect this year, policy and tax experts have stated that it will be implemented after an extensive public comment and review procedure that can often last years.
The Treasury and the IRS hinted at releasing regulations about the reporting of digital assets. However, they did not offer any timeline for such policies. As expected, the crypto community reacted positively to the new announcement.
The Blockchain Association said the news was a “positive step forward.” Interestingly, the U.S. House Financial Services Committee also supported the “stopgap action.” In addition, the commission emphasized that the “poorly constructed digital asset reporting requirements” had several fundamental issues.
IRS states 6050I–a problematic provision of the infrastructure bill requiring reporting digital asset transactions over $10K–isn’t effective until there’s more rulemaking. A positive step forward given its impossibility and breadth of reporting required.https://t.co/x8SFAQfuEh
— Blockchain Association (@BlockchainAssn) January 16, 2024
Some of the questions about the law include privacy concerns. The law states that an American receiving more than $10,000 in cryptocurrency during “trade or business” must disclose the identity of the person who provided them the money.
Users who receive funds from DAOs could face difficulties providing the details of an individual payer they know. Crypto users believe the tax reporting requirements could endanger the concept of decentralization.
Glad to see the IRS has belatedly listened to us and recognized the impossibility of complying with 6050I using crypto, but its statement on the matter is baffling. They state that the new crypto reporting obligations in the Infrastructure Investment and Jobs Act “requires the…
— Jerry Brito (@jerrybrito) January 16, 2024
Crypto businesses are somewhat relieved by the temporary halt, but crypto policies in the US remain uncertain. So, crypto businesses are still faced with uncertainty. There’s no doubt that continuous dialogue between crypto stakeholders and the US government is the only path to crafting favorable policies.
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