Cryptocurrency has been treated as property for tax purposes ever since the IRS released initial guidance in 2014. In the intervening years, the agency has provided little guidance for investors in terms of rules for reporting gains.
Under the new infrastructure law, cryptocurrency “brokers” that provide services effectuating digital asset transfers (in other words, cryptocurrency exchanges) will be required to disclose information about their customers directly to the IRS on Form 1099-B.
Companies and exchanges will also be required to file a report anytime they receive over $10,000 in cryptocurrency. The recipients in the transaction will also be subject to certain reporting requirements, including verifying personal information and Social Security numbers.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the new cryptocurrency reporting requirements.
Below is a summary of the debate that ensued between the two professors.
Bloink: For too long, taxpayers have profited from cryptocurrency transactions without paying their fair share of taxes. It’s been a loosely regulated industry that has given investors the opportunity to hide gains for years. The new expansive reporting regime will go a long way to put an end to that so that everyone is paying taxes on their investment gains in the proper manner.
Byrnes: This expansive new law is going to be an administrative nightmare. It’s overly broad in that it imposes reporting requirements even on parties that may not have the relevant information they’re being asked to provide. The parameters of the new reporting requirements should have been tailored before the legislation was passed.