The United States Securities and Exchange Commission (SEC) is on the verge of approving a spot Bitcoin exchange-traded fund (ETF), a move that could significantly change the crypto landscape. However, the readiness of the United States to handle a surge of first-time crypto investors, particularly in terms of tax compliance, is questionable.
Crypto investors, like their counterparts in stocks, bonds, and real estate, are required to pay taxes on their profits. However, the specifics of this requirement are still unclear. Jerry Brito, CEO of crypto lobbying group Coin Center, has expressed concerns about the feasibility of complying with crypto tax reporting obligations, especially in light of a provision added to the United States Infrastructure Investment and Jobs Act a few years ago.
This provision, effective from Jan. 1, 2024, mandates anyone who receives $10,000 or more in cryptocurrency in their trade or business to report the transaction to the IRS. Brito questions the practicality of this requirement, particularly for Bitcoin miners receiving block rewards exceeding $10,000, and for those engaging in on-chain decentralized exchanges of crypto for crypto.
Despite these concerns, Omri Marian, professor of law and academic director of the Graduate Tax Program at the University of California, Irvine School of Law, disagrees with Brito’s characterization. He argues that the law only applies to payments over $10,000 in the context of a ‘trade of business,’ and that the medium of exchange makes no difference. He also believes that in most cases, miners will not be considered to be engaged in a ‘trade or business’ under current law, and thus the requirement will not apply to them.
However, the IRS has yet to publish any guidance in this area, which adds to the uncertainty. Shehan Chandrasekera, head of tax strategy at CoinTracker, believes it’s too early to conclude that compliance is virtually impossible, but acknowledges that it will be a challenge in the short term.
Despite the lack of formal tax guidance for crypto in the U.S., Marian does not believe that this will hinder crypto adoption. He points out that crypto has been on the rise in the U.S. since its introduction, and there is no empirical evidence linking market movements and U.S. tax guidance on cryptocurrencies. He also believes that if crypto adoption does not increase in the U.S., it will not be due to tax treatment.
Given the current situation, the most important thing for retail investors to know about crypto tax reporting for 2024 is the need to carefully document their transactions. As IRS attention toward cryptocurrency increases, it will be crucial for taxpayers to be able to support their transactions, especially if audited.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 🇬🇧 |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | Chandrasekera, Marian, Nathan Goldman, Miller Whitehouse-Levine, Brito |
| Companies | North Carolina State University’s Poole College of Management, IRS, DeFi Education Fund |
| Currencies | Bitcoin |
| Securities | None |
