EddieJayonCrypto

 28 Jun 24

tl;dr

The U.S. Department of the Treasury's Internal Revenue Service has released new tax regulations for cryptocurrency transactions. Starting in 2025, crypto brokers will be required to file 1099 forms and keep track of customers' tokens' cost basis from 2026. The rule exempts most routine stablecoin sa...

The U.S. Treasury's IRS has issued a new tax regime for cryptocurrency transactions, requiring brokers to file 1099 forms for transactions starting in 2025. Exceptions are made for DeFi and non-hosted wallet providers.

The new rule sets reporting requirements for digital assets brokers, affecting an estimated 15 million people and 5,000 firms. It aims to improve tax compliance for digital assets and reduce the burden on taxpayers.

The rule establishes exemptions and reporting guidelines for stablecoin sales and NFT transactions, with provisions for potential revisions based on future legislation.

The U.S. Department of the Treasury's Internal Revenue Service has released new tax regulations for cryptocurrency transactions. Starting in 2025, crypto brokers will be required to file 1099 forms and keep track of customers' tokens' cost basis from 2026. The rule exempts most routine stablecoin sales and sets a $600 annual threshold on NFT proceeds before reporting is required. However, decentralized finance operations and non-hosted wallet providers will have a separate rule later in the year. The IRS aims to improve tax compliance and reduce evasion, affecting approximately 15 million people and 5,000 firms.

The rule released Friday will go into effect for transactions starting in 2025 and will require brokers to keep tabs on cost basis for customers' tokens starting in 2026. The IRS won't call for reporting on most routine stablecoin sales and is putting a $600 annual threshold on NFT proceeds before they need to be reported.

The U.S. Treasury Department issued its long-awaited tax regime for cryptocurrency transactions, setting up filing rules for digital assets brokers that will begin with transactions happening next year. The new Internal Revenue Service (IRS) rules for crypto brokers call for trading platforms, hosted wallet services, and digital assets kiosks to submit disclosures on the movements and gains of customers' assets. Those assets will also include stablecoins such as Tether's (USDT) and Circle Internet Financial's (USDC) and high-value non-fungible tokens (NFTs), though the IRS explicitly refuses to settle the longstanding debate over whether tokens should be considered securities or commodities.

Non-custodial crypto businesses – such as decentralized exchanges and unhosted wallet providers – are only getting a temporary reprieve from the new filing demands. The popular crypto platforms that handle a "substantial majority" of transactions can't wait any longer for rules, but the other issues need more study and they'll get their own rule "later this year."

The U.S. tax regulators estimated about 15 million people will be affected by the new rule, and about 5,000 firms will need to comply.

The IRS said it tried to avoid some burdens on users of stablecoins, especially when used to buy other tokens and in payments. A normal crypto investor and user who doesn't earn more than $10,000 on stablecoins in a year is exempted from the reporting. Stablecoin sales will be tallied collectively in an "aggregated" report rather than as individual transactions, the agency said, though more sophisticated and high-volume stablecoin investors won't qualify.

The IRS clarified Friday that any attempt in this rule to assign buckets to crypto assets isn't meant to reinforce a side in the industry's ongoing battle with regulators – specifically the U.S. Securities and Exchange Commission (SEC) – to define whether tokens are securities or commodities. Such a stance "is outside the scope of these final regulations," the IRS explained.

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