U.S. crypto investors brace for more taxes, but with clearer rules for traders

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Of course, you may need to pay US taxes on these crypto transactions. But at least it will be easier to find out how much you owe.

Further pressure from Congress to force crypto brokers to report transactions to the Internal Revenue Service could create unwanted tax bills, but could clarify the rules for traders and users of Bitcoin and other digital tokens, potentially strengthening the system in the long run, people in the industry say.

The new rules, a last-minute addition to the $ 550 billion bipartisan infrastructure package currently being considered by the US Senate, would also require companies to disclose digital asset transactions over $ 10,000. The provisions are designed to raise $ 28 billion. The measures add to the increased control that the IRS recently applied to traders of Bitcoin, Ethereum and other digital assets. The agency has promised it will release new rules that clarify how these virtual currencies should be taxed.

People who trade digital currencies must pay income taxes on all winnings, even though some crypto investors have ignored their tax obligations. But even for those who want to follow the law, it can be difficult to keep track of what is owed.

Filing taxes on crypto transactions can create huge headaches, especially for those who make multiple transactions each year. While traditional brokerage houses are already required to send detailed tax forms to clients, crypto exchanges are not. Even though businesses wanted to help their clients file their taxes, it’s not always clear how to do it under current regulations.

In addition, tax obligations can appear in surprising places. People who use digital currencies to pay for things like, say, a Tesla or pizza are supposed to pay taxes on any increase in the value of the crypto they spend. This is a key difference between using digital currencies and real fiat currencies such as the US dollar to trade.

Cryptocurrency exchanges and others in the industry have raised concerns that the US Senate will rush the current rules without consulting them first.

Some have questioned whether the new rules and regulatory attention would encourage traditional investors to join the space or undermine the appeal of cryptocurrencies by killing its go-about philosophy.

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