IRS considers delaying implementation of crypto reporting rules
In November 2021, Congress passed the infrastructure bill containing the so-called “broker rules.” The broker rules require that crypto firms collect customer transaction data and was set to commence in 2023 with full reporting to occur in 2024 (for calendar year 2023). Recently, it has been reported that the IRS is considering a delay in implementing the reporting, although no official statement has been made or confirmed.
Since the passing of the law, industry stakeholders have been critical of the proposed reporting, stating that the change will require significant internal software and reporting systems upgrades and associated updates to relevant customer agreements given the invasive disclosure requirements.
Treasury and the IRS have not offered a reason for the delay, but it could potentially relate to the IRS’s efforts to develop a new information reporting form, Form 1099-DA (digital asset), which would be used for this reporting. A draft of the form is set to be released within this year. Alternatively, the government has indicated in the 2022 Green Book that further crypto guidance is forthcoming, including a revision to the broker rules to make the reporting less onerous for non-institutional taxpayers.
While the cause or duration of the potential delay is unknown, it is a welcome relief for taxpayers who have been preparing for the new reporting standards in 2023.