As previously discussed here, the IRS published guidance in December 2022 effectively postponing the January 1, 2023 effective date for certain digital asset broker reporting rules until final regulations are promulgated. To date, neither finalized nor proposed regulations have been published, and crypto market participants have been forced to ascertain their reporting obligations under existing broker reporting laws and without crypto-specific reporting guidance.
At this stage, the content and expected publication date of these proposed regulations remain unclear. While the IRS indicated that proposed regulations were forthcoming in their December guidance and subsequently submitted proposed regulations to the Office of Management and Budget (“OMB”) for its review, those proposed regulations have yet to be published even though the OMB already completed its review, as indicated here. Recently, two Congressmen issued a letter urging the IRS to publish the proposed regulations, although to date these regulations continue to remain in administrative limbo.
The lack of insight surrounding both the content and timing of these regulations may create significant difficulties for crypto market participants once published. If, for example, proposed regulations are issued and subsequently finalized during 2023, crypto market participants may find themselves in a time crunch to update their reporting systems to capture and report the necessary information on their customers’ IRS Form 1099-Bs. Of course, it is also possible that the regulations may not be finalized until after IRS Form 1099-B’s February 15, 2024 due date. Retail investors may particularly be impacted by the delay of these regulations, as the lack of guidance may result in them not receiving IRS Form 1099-Bs with sufficient information to report taxes on their cryptocurrency transactions. Until further guidance is published, crypto market participants must continue to attempt to ascertain their existing reporting obligations under the limited existing law.
