On January 16, 2024, the United States Internal Revenue Service and Treasury Department announced the delay of the reporting requirements for businesses who receive USD 10,000 or more in digital assets, pursuant to section 6050I.
Section 6050I obligates any person who receives USD 10,000 or more in cash, in the course of their trade or business, in a single or multiple related transactions, to report such to the IRS using Form 8300. Form 8300 requires specific information, including the name and tax identification number of the payor as well as a description of the transaction. The form needs to be filed within 15 calendar days of the transaction in question and records related to the filing must be maintained for at least five years. Additionally, every year the filer of a Form 8300 is required to provide a written statement to each person whose transaction(s) resulted in the filing. The statement needs to include: the filer’s contact information, summary of the transaction, as well as notification that a report was filed with the IRS.
As a general rule, a trade or business includes any activity that is carried out for the production of income, including the selling of goods or performing of services. For purposes of this reporting obligation, “person” is defined in the Form 8300 instructions as “[a]n individual, corporation, partnership, trust, estate, association, or company.”
The Infrastructure Investment and Jobs Act of 2021 amended the definition of “cash” under Section 6050I so as to include receipt of digital assets. “Digital Asset” is defined by reference to section 6045(g)(3)(D) as, “…any representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.” Under the Act, the reporting requirements were originally going to apply to returns required to be filed, and statements required to be furnished, after December 31, 2023. However, the proposed regulations clarifying the definition of the term digital assets found in section 6045(g)(3)(D) have not yet been finalized.
According to IRS Announcement 2024-4, “until the Treasury Department and the IRS publish regulations under section 6050I to implement section 80603(b)(3) of the Infrastructure Act, persons engaged in a trade or business who, in the course of that trade or business, receive digital assets or digital assets and other cash in one transaction (or two or more related transactions) will not be required to include those digital assets when determining whether cash received has a value in excess of the $10,000 reporting threshold for purposes of determining if reporting is required under section 6050I with respect to those transactions.”
Key Takeaways
- If your client’s business is accepting, or plans to accept, digital assets as payment, while reporting requirements are currently on hold, they will become active upon issuance of regulations. Now is the time to put processes into place to ensure reporting obligations are fulfilled – particularly given the short (15 calendar days from the transaction) filing requirement.
- The regulations intend to clarify the definition of “digital asset.” Any processes put into place must remain flexible to account for this current uncertainty.
