The Department of Treasury and the IRS issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law.
These final regulations reflect consideration of more than 44,000 public comments received last fall on the proposed regulations. They require brokers to report certain sale and exchange transactions that take place beginning in calendar year 2025 and will be reported on the soon-to-be released Form 1099-DA. The regulations implement reporting requirements by the Infrastructure Investment and Jobs Act, enacted in 2021.
Notice 2024-56 provides transition relief with respect to the reporting of information and backup withholding on digital assets by brokers under section 6045.
Notice 2024-57 provides that brokers are not required to report certain identified digital asset transactions under section 6045 until further notice.
Notices 2024-56 and 2024-57 will be published in Internal Revenue Bulletin 2024-29 on July 15, 2024.
Revenue Procedure 2024-28, subject to certain requirements, generally permits taxpayers to rely on any reasonable allocation of units unattached basis to a wallet or account that holds the same number of remaining digital asset units based on the taxpayer’s records of such unattached basis and remaining units. The allocation must be a reasonable allocation as defined in section 5.02 of this Revenue Procedure and must be made as of January 1, 2025. However, the taxpayer may identify the method of allocation and may comply with the requirements set forth in section 4.02 of this Revenue Procedure at a later date to the extent permitted by section 5.02(4) or 5.02(5) of this Revenue Procedure.
Final regulations are being published under section 6045 of the Internal Revenue Code that require brokers to file information returns, furnish payee statements, and backup withhold on certain digital asset sales and exchange transactions effected on or after January 1, 2025. These final regulations require taxpayers to specifically identify units of digital assets disposed of for purposes of determining basis and holding period on a wallet by wallet or account by account basis. Comments received in response to the Notice of Proposed Rulemaking for the broker reporting regulations mentioned that, prior to the issuance of the NPRM, taxpayers had interpreted IRS Virtual Currency FAQs 39-41 as permitting, or at least not prohibiting, use of a universal or multi-wallet basis allocation methodology, in which a taxpayer would treat all of its units of a particular cryptocurrency held across all of the taxpayer’s wallets as a single pool for purposes of basis allocation. The Treasury Department and the IRS have determined that guidance to taxpayers regarding how to transition from the universal basis approach to the wallet by wallet or account by account approach required by the broker reporting regulations is necessary.
"We reviewed thousands of public comments and believe this new guidance addresses those concerns while striking a balance between industry implementation challenges and closing the tax gap related to digital assets," said IRS Commissioner Werfel.
