Coin Center
Yesterday’s blog post by Coin Center highlighted that the 60501 tax law in the US Infrastructure Investment and Jobs Act has now come into effect. It requires individuals who receive cryptocurrencies valued at $10,000 or more in trades or business to report the names, addresses, social security numbers, and transaction details to the Internal Revenue Service (IRS).
The Infrastructure Investment and Jobs Act (IIJA), signed by President Biden in November 2021, includes the controversial tax revision in the 60501 tax law, which mandates individuals involved in cryptocurrency transactions or business valued at $10,000 or more to report to the IRS.
Reported details must include the names, addresses, social security numbers, transaction amounts, dates, and nature of the transactions. Failure to submit the report within 15 days of receiving the transaction may result in criminal charges. The law went into effect on January 1, 2024, and requires compliance from all US citizens without any further regulatory action.
Jerry Brito, the executive director of Coin Center, expressed concerns about the lack of clear guidelines in the 60501 tax law. He raised multiple questions regarding the scope and scenarios of the new regulation:
– When miners or network validators receive block rewards exceeding $10,000, whose name or address should be provided by the sender?
– Should users report if they receive $10,000 through the exchange function (Swap) of decentralized exchanges?
– Is it necessary to report when sending cryptocurrencies from centralized exchanges to wallets?
– If users receive a cryptocurrency through airdrops from protocol interactions but are unaware if it exceeds $10,000 in value, who should they ask?
– Does the IRS have a standard to determine if the value of cryptocurrencies exceeds $10,000?
Furthermore, Jerry mentioned that the reporting requirement under the tax law must be done using the “Form 8300” as specified by the Treasury Department. However, this form is designed for reporting “cash income,” and it has not been clearly explained how to report cryptocurrency income using this form. Additionally, the form is intended to be sent to the Financial Crimes Enforcement Network (FinCEN) and the IRS, but the former does not have the authority to collect reports on cryptocurrency transactions.
Jerry emphasized that the Treasury Department’s guidance so far is unclear, and he is unable to find clear rules to follow. He also stated that Coin Center will continue to take a firm stand in ongoing litigation with the Treasury Department to clarify how the law should be complied with.
Previously, the tax law drew attention because the targeted taxpayers mentioned in the infrastructure bill were “brokers,” which could include exchanges and custodial wallets, who are obliged to provide user data for taxation purposes. However, the law did not clearly define “brokers,” causing potential issues for miners or validation nodes who may also fall within the scope of regulation, making it difficult for them to fill in the sender’s information.
Nevertheless, the tax law has already been confirmed by the Treasury Department, and it is not intended to include miners, wallet providers, or DeFi engineers in the definition of brokers under the 60501 tax law. In other words, these individuals or companies will not have to worry about the KYC pressure resulting from the tax law.
When the law was signed into effect, many legislators suggested the need for additional regulations to make the reporting requirements more comprehensive, as collecting data through brokers would be very difficult or almost impossible to achieve.
In August of this year, the IRS also announced plans to introduce new tax regulations for the cryptocurrency space, scheduled to go into effect in 2026. This would potentially include cryptocurrency wallets, payment processors, centralized exchanges (CEX), and decentralized exchanges (DEX) as taxable brokers. These companies would be required to track user gains and losses and assist in submitting tax information, posing a significant threat to the decentralized ecosystem.
Coin Center, Jerry Brito, Cryptocurrency Taxes, Internal Revenue Service (IRS), US Infrastructure Investment and Jobs Act.