As cryptocurrencies continue gaining prominence, governments are rushing to align this emerging digital economy with existing oversight structures. A key focus is on tax policy and capturing potential revenue from crypto trading and spending, which are areas still not fully formalized.
For American cryptocurrency enthusiasts and investors, the reality of tighter trading accountability has already arrived. Stricter enforcement aims to mandate disclosures from brokerages directly to tax authorities.
This strengthens compliance and transparency around asset cost basis, gains, losses, and transfers, closing the door on operating in a tax gray area. Without a doubt, cryptos have become deeply integrated into consumer life, enabling spending across sectors.
Some of the best American online casinos increasingly leverage this technology to serve customers better. By using cryptocurrencies, these online casinos provide faster payouts, heighten security, and attract crypto holders.
But this blockchain integration between commerce and finance also necessitates updated regulations. Disclosure rules now require businesses to report customer crypto transactions over $10,000 to the IRS and collect their personal information.
Here’s what crypto holders and businesses need to know about the changing regulatory landscape in 2024 as crypto tax reporting takes effect in America.
Tax Reporting Expands – Form 1099-B Now Includes Crypto
A major piece of bipartisan infrastructure legislation signed into law in November 2021 expands tax information reporting rules for digital assets like cryptocurrency.
Beginning with 2023 tax returns filed in 2024, crypto brokers must provide 1099-B forms for stocks, securities, and crypto asset transfers. This aims to close a reporting gap where crypto gains and losses could be hidden from the IRS.
Specifically, the new rules amend Section 6045 of the tax code that includes “any person who (for consideration) is accountable for regularly providing all service effectuating transfers of all digital assets on behalf of another person.”
So brokers, exchanges, miners, wallet makers, and even developers whose software enables crypto transfers may have to comply. A Treasury official hinted miners and developers might dodge the rules, but legal wording suggests otherwise.
Digital Assets Now Are Subject to Cash Transaction Reports
The 2021 infrastructure bill also adds crypto to the definition of ‘cash’ for purposes of reporting large cash transactions over $10,000.
Businesses receiving over $10,000 worth of crypto, either in one shot or in a series of related transactions within 12 months, must file Form 8300 within 15 days. This is the same form filed today for cash payments over $10,000.
So, if you buy a $15,000 NFT directly from an artist using Bitcoin, they must collect and report your information. Or if you make multiple smaller crypto purchases from the same seller within a year that adds up to over $10k, that also triggers the reporting requirement.
Stiff Penalties Await Those Skirting New Crypto Rules
The bipartisan infrastructure legislation also imposes stringent penalties for skirting new crypto asset reporting rules. Failure to file required forms can incur fines of up to $3 million annually.
Even graver consequences await those intentionally evading expanded reporting regulations.
Individuals and businesses found to be intentionally disregarding reporting requirements or structuring transactions specifically to dodge them face severe criminal penalties.
These include prison sentences of 5 years and fines of up to $500,000 or equal to the assets at stake in dodged reports. Those who cause or conspire with others to avoid reporting also trigger additional penalties atop baseline sanctions.
In essence, the infrastructure legislation clamps down forcefully on attempts to fly under the regulatory radar with large crypto transactions or asset transfers. The rules aim to curb tax evasion and illicit use of cryptocurrency by mandating detailed disclosures to the IRS and other agencies.
How To Navigate Through These Changes
Since crypto brokers often lack complete records, taxpayers must meticulously log details on all their transactions, including dates, purchase/sale prices, amounts, wallet addresses, and gains/losses, to accurately calculate and report tax liability.
With concrete personal documentation, taxpayers can avoid brokers filing incorrect 1099-Bs showing inflated gains that are extremely difficult to dispute with the IRS.
Moreover, given the complex and evolving reporting rules across trading, spending, mining, staking, NFTs, and more, individuals and businesses require guidance from crypto-specialized CPAs and tax professionals.
These experts assist with correctly classifying assets, calculating income/losses across activities, filing the correct paperwork, securing deductions, satisfying accounting rules, and avoiding penalties.
While the 2021 infrastructure legislation marks a significant move to regulate crypto, it’s just the opening salvo. With digital assets becoming deeply integrated into finance and commerce, expect more guidance from Congress and federal agencies clarifying gray areas.
