On Nov. 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act (IIJA), a $1.2 trillion spending bill to subsidize road repairs, public transportation, utilities and clean energy initiatives.
In addition to this, the IIJA provided a broad definition of Digital Asset and requires all Digital Asset brokers to issue 1099s.
DEFINITION OF DIGITAL ASSETS
The IIJA broadly defines the term ”Digital Asset” as “any digital representation of value which is recorded on a cryptographically secured distributed ledge or any similar technology as specified by the Secretary.”
Under the new provisions of the IIJA, a Digital Asset is now deemed to be cash and, as such, any exchange of a Digital Asset will fall within certain cash exchange reporting requirements. One example would be transactions in excess of $10,000 which will be reported on Form 8300.
This means cryptocurrency investors may now face heightened reporting requirements.
NEW 1099 REQUIREMENTS
The IIJA will also require all Digital Asset Brokers, such as cryptocurrency exchanges, to issue Form 1099-B to users beginning with the 2023 tax year. IIJA broadly defines who is considered a Digital Asset Broker as someone who “regularly provides any service effectuating transfers of digital assets on behalf of another person.”
This means that certain organizations may now need to issue Form 1099-B that would not expect to have such a requirement. With that said, individual taxpayers will also start receiving Form 1099-B for income from Digital Assets that will need to be reported on an applicable income tax return since IRS will now be able to crosscheck the Form 1099-B.
The Form 1099-B reporting requirements are effective for transactions beginning on Jan. 1, 2023, with reporting requirements starting Jan. 1, 2024.
These amendments are highly complex and nuanced. More guidance on how to implement these new rules is likely to be provided as the effective date nears.
If you have any questions about the IIJA, the proposed changes or their impact on you or your business, please contact the tax advisors at GHJ.