- The IRS temporarily exempts businesses from reporting crypto transactions over $10,000.
- Controversial rule, active for three weeks, faces criticism for complexity.
- Separate law requires e-commerce platforms to send tax forms for $5,000+ transactions.
In an unexpected move, the Internal Revenue Service (IRS) has granted a temporary reprieve to businesses, exempting them from reporting crypto transactions exceeding $10,000 until final regulations are established. The crypto community debates its motives.
The controversial requirement, initiated just three weeks ago, aimed to align digital currencies, including Bitcoin, with the same reporting standards as cash transactions. The IRS, concerned about potential tax evasion in the realm of digital currencies, particularly for those operating as a trade or business, paused the implementation without providing an explanation.
The temporary halt impacts small businesses, crypto traders, and nonprofits, relieving them from the immediate burden of complying with the new reporting rule. This pause does not affect a separate law regarding digital transactions, where e-commerce platforms will be required to send tax forms to customers receiving $5,000 or more in payments, including cryptos, annually, starting in 2024.
The IRS decision has prompted questions about distinguishing between investment and business transactions in digital currency and addressing scenarios where the value of crypto received increases through a “hard fork”. Crypto advocacy groups, such as CoinCenter, criticized the rule’s complexity and lack of final guidance from the IRS.
Once final rules are established, businesses will need to report specific details to the IRS, including the name, address, and Social Security number of individuals providing digital funds, along with transaction amounts, dates, and nature. Failure to comply will be treated as a felony.
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Despite the IRS not categorizing cryptocurrencies as money but rather as stocks for tax purposes, the temporary suspension provides a breather for businesses awaiting clearer guidelines in the crypto reporting landscape.
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