19 January 2024 • 2 minute read
IRS delays reporting of business transactions involving receipt of digital assets until regulations are issued
On January 16, 2024, the Treasury Department and the Internal Revenue Service (IRS) issued Announcement 2024-4, informing businesses that they do not have to report the receipt of “digital assets” in the same way they report the receipt of cash, at least until Treasury and IRS issue regulations specifically. This announcement may serve as a significant relief to businesses accepting cryptocurrency and other digital assets as payment for goods and services.
Historically, Section 6050I of the Internal Revenue Code (Code) required any person engaged in a trade or business who received more than $10,000 in cash in a single transaction (or series of related transactions) to report that information to the IRS on Form 8300 and to furnish an annual written statement to any payer reported on IRS Form 8300.
In 2021, the Infrastructure Investment and Jobs Act expanded, effective January 1, 2024, the definition of “cash” under Section 6050I to include “any digital asset,” which generally would include any form of cryptocurrency (including so-called stable coins), but neither Treasury nor the IRS had, until the Announcement, provided any guidance for applying Section 6050I to digital assets.
With the effective date for this expansion having passed, this lack of guidance left businesses accepting cryptocurrency as a form of payment with no way to meaningfully comply with Section 6050I. Given the potentially severe penalties attending a failure to comply with Section 6050I (for example, an intentional failure to file could result in a fine up to $25,000 for an individual, or $100,000 for corporations, and even imprisonment), the Announcement should assuage concerns in the business community about compliance with Section 6050I.
Specifically, the Announcement provides transitional guidance under Section 6050I with respect to reporting transactions involving receipt of digital assets and clarifies that, at this time, digital assets are not required to be included when determining whether cash received in a single transaction (or two or more related transactions) meets the reporting threshold.
Treasury and the IRS intend to promulgate regulations specifically addressing the application of Section 6050I to digital assets and providing forms and instructions for reporting, although the timing of these regulations and new forms was not indicated in the Announcement.
For more information, please contact the author or your usual DLA Piper contact.
Historically, Section 6050I of the Internal Revenue Code (Code) required any person engaged in a trade or business who received more than $10,000 in cash in a single transaction (or series of related transactions) to report that information to the IRS on Form 8300 and to furnish an annual written statement to any payer reported on IRS Form 8300.
In 2021, the Infrastructure Investment and Jobs Act expanded, effective January 1, 2024, the definition of “cash” under Section 6050I to include “any digital asset,” which generally would include any form of cryptocurrency (including so-called stable coins), but neither Treasury nor the IRS had, until the Announcement, provided any guidance for applying Section 6050I to digital assets.
With the effective date for this expansion having passed, this lack of guidance left businesses accepting cryptocurrency as a form of payment with no way to meaningfully comply with Section 6050I. Given the potentially severe penalties attending a failure to comply with Section 6050I (for example, an intentional failure to file could result in a fine up to $25,000 for an individual, or $100,000 for corporations, and even imprisonment), the Announcement should assuage concerns in the business community about compliance with Section 6050I.
Specifically, the Announcement provides transitional guidance under Section 6050I with respect to reporting transactions involving receipt of digital assets and clarifies that, at this time, digital assets are not required to be included when determining whether cash received in a single transaction (or two or more related transactions) meets the reporting threshold.
Treasury and the IRS intend to promulgate regulations specifically addressing the application of Section 6050I to digital assets and providing forms and instructions for reporting, although the timing of these regulations and new forms was not indicated in the Announcement.
For more information, please contact the author or your usual DLA Piper contact.
