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U.S. Department of the Treasury Proposes Expanded Information Reporting for Crypto

By Roger M. Brown, Esq., Global Head of Tax Solutions

The U.S. Treasury’s 2022 Revenue Proposals (cited below) would significantly expand the information that crypto exchanges will have to report to the IRS. There are three key provisions.   

The first requires crypto exchanges (and other financial institutions) to report the following information to the IRS for accounts with a “gross flow” of at least $600 (or a balance of at least $600):   

   – Transfers of crypto between exchanges

   – Transfers to and from another account with the same owner 

   – Deposits into the exchange

   – Withdrawals from the exchange 

   – Purchases

   – Sales 

   – Cash balances

   – Transactions with a foreign account

The second provision requires crypto exchanges and other businesses that receive more than $10,000 in crypto in a single transaction to report the transaction to the IRS.

The third provision requires crypto exchanges and custodians to report certain beneficial owners of certain entities holding accounts with the exchange. Reporting would apply to proceeds from the sale of crypto and other items the IRS identifies in future regulations.

Effectively, the Administration proposed to expand Chapters 3 and 61 of the tax code and to codify the United States’s participation in the Common Reporting Standard (“CRS”). Under CRS, the IRS would automatically exchange information with foreign governments to aid in enforcement efforts for their local tax residents. Reciprocally, those foreign countries would provide information to the United States that those countries receive from their local exchanges that have U.S. customers.

All of the proposals would generally apply to the 2022 tax year. This is because the proposals would be effective for tax returns required to be filed after December 31, 2022 (and the 2022 returns are due after this date). 

The Treasury’s Proposal can be found here: https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf (pages 88, 89, and 94)

The next step is for the House of Representatives to consider which provisions, if any, it wishes to advance to the Senate for consideration.

Lukka is the leading institutional crypto asset software and data provider. Lukka serves the largest crypto asset institutions with middle and back-office solutions, bridging the gap between the complexities of blockchain and crypto-asset data and traditional business needs. To learn more or talk to Roger Brown visit https://www.lukka.tech/.

Roger Brown, Esq. is the Global Head of Tax Solutions for Lukka. He engages with law firms, accounting firms, investment funds, governments, and other institutional clients, while also advising the product development and customer service teams.