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Crypto Tax Rule Changes for 2024

The $10,000 Question: Do §6050I Reporting Requirements Affect You?

New §6050I reporting requirements have led to a lot of confusion in the cryptosphere – learn what these requirements mean and how they might affect you over the coming year.

Crypto taxes can confuse even seasoned tax professionals, so when new rules surface, you should look beyond online forums for accurate insights. The new §6050I reporting requirements are a prime example, causing confusion among traders and investors. In particular, the threat of a felony charge for not reporting transactions within 15 days is quite a scare.

But before you start panicking, let’s take a calm look at the new requirements, who is required to follow them, and when you need to worry.

What is §6050I?

IRC §6050I requires that any person engaged in a trade or business receiving cash excess of $10,000 in a single transaction or related transactions must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade of Business, within 15 days of receipt. If the 15th day falls on a weekend or holiday, you have until the next business day to make the filing.

Any person who willfully fails to make a return or makes a false return may be subject to prosecution. The civil penalty for a failure to file form 8300 is $250 per return, up to $3 million per calendar year. Meanwhile, the criminal penalty for willfully failing to file or filing an inaccurate Form 8300 is up to $25,000 and five years of imprisonment.

What is §6050I?
Form 8300 collects a substantial amount of personal information from anyone sending you $10,000 worth of cash or crypto. Source: IRS

As part of the Infrastructure Investments and Jobs Act of 2021, the IRS modified the language to include digital assets defined in §6045(g)(3)(D) – read: crypto – effective January 1, 2024. But, on January 16, 2024, the IRS announced that we don’t need to file the reports for digital asset transactions until the Treasury Department issues further guidance.

Form 8300 is an information-only document that requires taxpayers to identify the individual(s) from whom the $10,000+ payment was received, including their name, SSN/EIN, address, date of birth, occupation, and transaction details (date received, total value, and transaction type). As a result, §6050I has no material impact on the amount of tax you owe.

Who Needs to File?

IRC §6050I applies to those “engaged in a trade or business.”

The IRS defines a “trade or business” as any activity producing income from selling goods or performing services. Notably, it’s not limited to integrated aggregates of assets, activities, and goodwill that comprise a more formal definition of a business. But unfortunately, there’s no robust definition of “trade or business,” and the term remains open to interpretation.

That said, there are a few crypto-specific cases that likely fall under the definition:

  • Professional Traders – Many crypto traders and investors leverage Schedule C to write off certain expenses related to their trading activities, while others trader tax status (TTS) to take advantage of other tax benefits. The IRS may consider crypto trading a “trade or business” and enforce the reporting requirements in these cases.
  • Miners, Stakers & Lenders – Mining, staking, and lending crypto assets could qualify as “performing services” under the IRS definition of a “trade or business.” As a result, anyone using decentralized finance (DeFi) protocols could find themselves subject to the new rules unless the IRS or Treasury Department indicates otherwise.
  • Professional NFT Artists – Creating and selling non-fungible tokens (NFTs) as a hobby may not qualify as a “trade or business,” but those generating a regular income and selling a substantial volume of artwork could fall under the new requirements.
  • Businesses – Businesses that accept cryptocurrencies as payment must file Form 8300.

The good news is that the IRS and Treasury Department acknowledge the complexity of digital assets and plan to issue specific guidance.

Preparing for the Rule

The IRS and Treasury Department may have provided a temporary reprieve from IRC §6050I, but the rules could apply to transactions made during the 2024 tax year.

You should carefully document every crypto transaction for tax purposes but give transactions over $10,000 special attention. Record the amount, payor/wallet address, and date for each transaction to ensure you can furnish the information if it’s required. That way, you have some basis for collecting the data you need to complete Form 8300.

Preparing for the Rule
ZenLedger’s Grand Unified Accounting reports list every transaction across wallets and exchanges. Source: ZenLedger

ZenLedger can help you record these transaction details automatically across your wallets and exchanges. In addition, we provide a Grand Unified Accounting spreadsheet detailing every transaction made during a tax year, enabling your accountant or tax professional to get the information they need to file or defend you in an audit.

What’s Next?

IRC §6050I has sparked a lot of controversy in the crypto industry.

In June 2022, Coin Center filed a lawsuit over the rule’s unconstitutional financial surveillance. The organization argued that the rule forced ordinary people to collect highly intrusive information about other ordinary people and that some demands violated the First Amendment. While the courts dismissed the case in July 2023 over threshold issues, Coin Center said it would continue to fight the rule.

The reporting requirements also have a lot of outstanding questions:

  • What’s an investment versus a trade of business transaction?
  • How will the recipient know the sender’s details if using some platforms?
  • How will airdrops and hard forks be treated if the FMV exceeds $10,000?
  • What are “related” transactions in the context of crypto?

Until the IRS and Treasury Department issue specific guidance, the crypto industry remains in a holding pattern, and traders and investors can do little more than try to prepare as best they can.

The Bottom Line

IRC §6050I introduces new reporting requirements for those involved in a “trade or business” receiving crypto worth over $10,000. In particular, the new rules require anyone receiving these funds to collect personal information from the sender, including their name, address, and SSN/EIN, and transmit that information to the IRS via Form 8300.

The IRS and Treasury Department have issued a temporary reprieve while they develop crypto-specific rules. Taking proactive measures is a good idea, though, because regulations apply to any transactions made in the 2024 tax year (unless they specify otherwise in upcoming guidance).

ZenLedger can help you collect and organize crypto transactions by connecting with your wallets and exchanges and aggregating the information. In addition to keeping everything in one place, the platform can also assist you during tax season by computing your capital gains and losses and generating the forms you need to file.

Get started with ZenLedger for free!

This material has been prepared for informational purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax, or other advice specific to your particular situation.

Justin Kuepper

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