How cryptocurrency sales should be reported on Forms 1099 has been a topic of debate ever since taxpayers found ways to make gains from it. For several years, Treasury Department officials have indicated that the government was working on proposed regulations that would ultimately require reporting on sales of cryptocurrency, probably on Forms 1099-B, Proceeds from Broker and Barter Exchange Transactions.

In August, the discussion about potential Form 1099 reporting on sales of cryptocurrency and other digital assets got really heated. I’m sure by now you’ve heard of the infrastructure bill that would require Form 1099-B and cost-basis reporting on digital assets sold by customers of brokers.

However, despite all the talk, the proposed Treasury regulations have not yet been issued and the infrastructure bill is currently still in limbo. There is no clear requirement to report sales of cryptocurrency on Forms 1099 at this time.

Of course, the lack of a clear Form 1099 reporting requirement on cryptocurrency sales does not mean that gains from those sales do not represent taxable income. So, there is a need for clear reporting requirements to help close any revenue gaps resulting from the failure of investors to recognize gains on the sales of their cryptocurrency and other digital assets.

How long do you have?

It usually takes several years for new information reporting provisions to be implemented. After new legislation is enacted, Treasury typically takes at least a year to publish proposed regulations implementing that legislation. Then the public has an opportunity to comment, and Treasury reviews those comments and refines the regulations before they are finalized. After the final regulations are published, the financial services community generally needs, and is given, at least 18 months to build or modify the systems needed to comply, with an effective date almost always starting at the beginning of a new calendar year. In other words, hold on for the wild ride because we have a while.

Crypto = Cash

The Infrastructure bill would treat digital assets as “cash” for purposes of reporting “cash” received in the course of a trade or business. Currently, people engaged in a trade or business must report to the IRS on Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, when they receive more than $10,000 in cash—or cash equivalents—in one or multiple transactions. The infrastructure bill defines digital assets broadly, so this reporting requirement may ultimately include the receipt of digital assets beyond cryptocurrency. Therefore, this could become a fairly widespread reporting obligation since many companies are now considering whether they should accept cryptocurrency and other digital assets as a form of payment. If you are one these companies, you should factor this potentially complex reporting requirement into those deliberations.

That’s all for the Crypto Tax News! Enjoy the modern day wild wild west while you can lol.