CSG Law Alert: IRS Issues Transitional Digital Asset Reporting Guidance
On December 23, 2022, the Internal Revenue Service (the “IRS”) issued transitional guidance in Announcement 2023-2 for reporting digital asset (e.g., cryptocurrency) information under sections 6045 and 6045A of the Internal Revenue Code.
By way of background, the Infrastructure Investment and Jobs Act (the “Act”), enacted in 2021, amended sections 6045 and 6045A to create additional digital asset reporting requirements for brokers. For example, under the Act, the definition of a broker was modified to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” Additionally, the definition for “specified securities” under section 6045(g) was modified to include digital assets which were also required to be included in basis reporting as “covered securities” if acquired after December 31, 2022. While the changes to digital asset reporting requirements were significant, to date, the IRS has provided limited guidance regarding implementation.
Announcement 2023-2 provides temporary relief for brokers from having to report digital asset information under sections 6045 and 6045A. The IRS and Department of the Treasury intend to implement sections 6045 and 6045A’s provisions regarding digital asset reporting by publishing regulations and providing brokers with new reporting forms and instructions. Until then, brokers may both (1) report gross proceeds and basis; and (2) furnish statements on transfers of covered securities, “as required under existing law and regulations as of December 23, 2022.” To be clear, brokers will not be required to (1) report or furnish additional information with respect to dispositions of digital assets under section 6045; (2) issue additional statements under section 6045A; or (3) file returns reporting transfers of digital assets under section 6045A(d), until the contemplated regulations are issued. Please note that Announcement 2023-2 only applies to information required to be reported by brokers and that taxpayers are still required to report income received from any transaction involving digital assets.