The requirement that businesses in the U.S. report any digital asset transaction over $10,000 in value has been put on hold by the Treasury Department and Internal Revenue Service (IRS) until the regulators release a clear regulatory framework that lays out the requirements.
The new reporting rule was created within the Infrastructure Investment and Jobs Act and established that digital assets are deemed equivalent to cash when it comes to taxpayers who receive payment in crypto through the course of their trade or business.
The law took effect on Jan. 1, but according to a Tuesday announcement from the Treasury, these businesses can hold off on reporting such transactions for the time being as the regulators still need to clarify the exact requirements before the rule goes into effect.
“This announcement provides transitional guidance under section 6050I with respect to reporting transactions involving receipt of digital assets and clarifies that at this time, digital assets are not required to be included when determining whether cash received in a single transaction (or two or more related transactions) meets the reporting threshold,” the IRS said. “The Treasury Department and the IRS, however, intend to prescribe regulations, to provide additional information and procedures for reporting the receipt of digital assets under section 6050I.”
The Treasury Department said they plan on “publishing regulations specifically addressing the application of section 6050I to digital assets and by providing forms and instructions for reporting that address the inclusion of digital assets.”
Businesses that receive digital asset payments above $10,000 do not need to report those transactions until those regulations are published.
The Treasury and IRS noted that businesses receiving cash payments over $10,000 still need to report those transactions within 15 days of receipt.
“Treasury and the IRS intend to issue proposed regulations to provide additional information and procedures for reporting the receipt of digital assets, giving the public an opportunity to comment both in writing and, if requested, at a public hearing,” the announcement said.
This decision follows a revision of the Infrastructure Investment and Jobs Act (IIJ Act) by the U.S. Treasury Department and the IRS. It is seen as a response to the pushback the new law received from the crypto community.
“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,” said Jerry Brito, executive director of DC-based crypto think tank CoinCenter. “They state that the new crypto reporting obligations in the Infrastructure Investment and Jobs Act ‘requires the Treasury Department to issue regulations before it goes into effect.’ There is nothing in that law that says this and we are unaware of any legal reasoning that would have this be the case.”
“For the time being, it seems like they will not be enforcing the law, which is a practical win and I’m sure that is welcomed by many confused taxpayers,” he added. “Still, the IRS has not explained how it’s capable of doing this.”
In a follow-up post, Brito said it’s “Also interesting to note that this claim that the law ‘requires the Treasury Department to issue regulations before it goes into effect’ is in the press release accompanying the official Announcement. The official announcement doesn’t make any such claim. Instead, it just says that one doesn’t need to count digital assets toward the 6050I reporting. The problem is that Congress has said otherwise and the IRS does not have the authority to second guess it. Very confusing.”
The U.S. House Financial Services Committee said they “welcome this stopgap action by @IRSnews to clarify the forthcoming regulations on section 6050I for digital assets,” but also pushed back on the lack of clarity, saying “this does not fix the underlying problems with the poorly constructed digital asset reporting requirements” that were passed on Jan. 1.
“Congress must urgently consider the Keep Innovation in America Act, the bipartisan solution to fix the misguided reporting requirements from the IIJA and keep the digital asset ecosystem in the U.S.,” they said.
