Playing the waiting game on the crypto tax return | Cadwalader, Wickersham & Taft LLP

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As previously reported here, the IRS issued guidance in December 2022 effectively delaying the January 1, 2023 effective date for certain digital asset broker reporting rules until final regulations are enacted. To date, no finalized or proposed regulations have been published, and crypto market participants have been forced to verify their reporting obligations under existing broker reporting laws and without industry-specific reporting guidelines. cryptography.

At this stage, the content and expected release date of these settlement proposals remain unclear. While the IRS indicated that the proposed regulations were forthcoming in its December guidance and subsequently submitted the proposed regulations to the Office of Management and Budget (“OMB”) for review, these proposed regulations have not yet published even though the OMB has already completed its review. , as shown here. Recently, two members of Congress issued a letter urging the IRS to release the proposed regulations, although to date these regulations continue to remain in administrative limbo.

The lack of information about the content and timing of these regulations can create significant difficulties for crypto market participants once released. If, for example, proposed regulations are published and then finalized in 2023, crypto market participants could find themselves in a time crunch to update their reporting systems to capture and report the necessary information on forms. IRS 1099-B from their clients. Of course, it is also possible that the regulations will not be finalized until after the IRS Form 1099-B due date of February 15, 2024. Retail investors may be particularly affected by the delay in these regulations, as the lack guidelines may prevent them from receiving IRS Form 1099-B with enough information to report taxes on their cryptocurrency transactions. Until new guidance is issued, crypto market participants should continue to attempt to verify their existing reporting obligations under the limited existing law.

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