The controversial tax law that requires U.S. citizens to report crypto transactions of $10,000 or more has taken effect, giving the IRS a major new source of data on crypto users. The law, included in the Infrastructure Investment and Jobs Act, is now in effect as of January 1, 2024.
The IRS Is On The Wings Waiting
According to Jerry Brito, the Executive Director of Coin Center, the law requires anyone who receives $10,000 or more in crypto during their trade or business to report to the IRS about that transaction. As part of this reporting, details must include, among other things, the name, address, and Social Security number of the person from whom the funds were received, the amount received, and the date and nature of the transaction.
What’s worse, Brito warns, is that any user who doesn’t file within 15 days of receiving the transaction could be found guilty of a felony. From a revenue perspective, the law is a major expansion of the IRS’ ability to track crypto transactions. The IRS has long been concerned about people and businesses using cryptocurrency for tax evasion.
As such, the enforcement of this law gives the tax collecting agency a powerful new tool to address the problem possibly. However, this implementation could present obstacles to crypto adoption and innovation.
Since the threshold has been placed at $10,000, many people and entities will likely be reluctant to use popular coins, including Bitcoin, USDT, or Ethereum, if they know they must report every transaction to the IRS. As such, this could slow the adoption and even innovation in crypto.
Coin Center Filed Law Suit, Blames IRS For Providing Guidance
Before this implementation, Coin Center, a crypto advocacy group, filed a lawsuit challenging its constitutionality. Specifically, Coin Center argues that the new law is ambiguous and makes it challenging for crypto users and businesses to comply.
Citing how expansive crypto is and the number of different players involved, ranging from simple transactors to miners and validators, Coin Center, in their lawsuit, says the law doesn’t provide clarity. Meanwhile, the IRS, on its path, has failed to provide guidance.
The lawsuit is still pending, but whether it will be successful remains to be seen. In the U.S., crypto assets are considered properties, meaning capital gains or losses must be reported for tax purposes. The rate applied to these capital gains or losses varies depending on how long it is held.
