The U.S. Treasury Department finalized a rule on Friday that mandates cryptocurrency brokers, including exchanges and payment processors, to report detailed information on users’ sales and exchanges of digital assets to the Internal Revenue Service (IRS). This move aims to address tax evasion in the crypto sector and is a key component of the $1 trillion bipartisan 2021 Infrastructure Investment and Jobs Act. When the bill was passed, it was projected that these new regulations could generate close to $28 billion in revenue over the next decade.
The new rule will be implemented starting next year, with full effect in the 2026 tax filing season. It aligns cryptocurrency tax requirements with those for other financial instruments like bonds and stocks, providing consistency in tax reporting.
Treasury officials have modified the initial proposal to reduce some burdens on brokers and to introduce the requirements in phases. A notable inclusion is a $10,000 threshold for reporting transactions involving stablecoins, which are typically pegged to assets such as the U.S. dollar.
The cryptocurrency industry responded to the initial proposal with a significant comment letter campaign, arguing that the broad definition of a broker infringed on the privacy of crypto owners. The Treasury received over 44,000 comments on the proposal, which led to adjustments in the final rule. Additional rules to establish tax reporting requirements for non-custodial brokers, including decentralized crypto exchanges, are anticipated later this year.
The Treasury emphasized that crypto owners have always been required to pay taxes on the sale or exchange of digital assets. The new rule introduces reporting requirements to aid taxpayers in filing accurate returns and paying owed taxes under existing law.
A new tax reporting form, Form 1099-DA, will be introduced to help taxpayers determine their tax obligations more easily, reducing the need for complicated calculations to determine gains. Brokers will need to send this form to both the IRS and digital asset holders, assisting with their tax preparation.
Currently, the IRS requires crypto users to report many digital asset activities on their tax returns, regardless of whether the transactions resulted in a gain. Users must make these calculations themselves, as trading platforms do not provide this information to the IRS. The new rules aim to streamline this process and ensure compliance with tax laws.
