Infrastructure Bill 60501 Tax Law in Effect, Crypto Policy Organization Coin Center: Regulations Unclear, Users Difficult to Comply

Coin Center released a blog post yesterday, highlighting that the U.S. "Infrastructure Bill" has put into effect the 60501 tax law, which includes a requirement for individuals who receive over $10,000 worth of cryptocurrency in transactions or business activities to report to the Internal Revenue Service (IRS) with details such as names, addresses, social security numbers, and transaction specifics.

The Infrastructure Bill is set to pass the House on 11/5, with violations of the 6050I tax law being classified as a criminal offense; What should DeFi do?

IRS: Reporting Details Required for Cryptocurrency Transactions Exceeding $10,000 in Value

The cryptocurrency and blockchain think tank Coin Center revealed that the U.S. President Biden signed the Infrastructure Investment and Jobs Act (IIJA) in 2021, which includes the controversial tax code amendment known as the 60501 tax law, requiring individuals engaging in cryptocurrency transactions or businesses exceeding $10,000 in value to report to the IRS.

Reported details must include the names, addresses, social security numbers, transaction amounts, dates, and nature of the sender and recipient; failure to submit the report within 15 days of the transaction may result in criminal charges.

The law went into effect on January 1, 2024, and will be automatically enforced, requiring all U.S. citizens to comply.

Jerry Brito Raises Multiple Questions: Uncertainty on Compliance

Jerry Brito, Executive Director of Coin Center, expressed concerns that many specific regulations within the 60501 tax law have not been clearly defined, posing unresolved potential issues. Without more detailed guidance from the IRS, it will be challenging for cryptocurrency users to comply with reporting requirements.

New crypto tax reporting obligations took effect on Jan 1.

If you receive $10k or more in crypto you now have an obligation to report the transaction (including names, addresses, SS numbers, etc.) to the IRS within 15 days under threat of a felony charge. pic.twitter.com/wyRsfJEpMo

— Jerry Brito (@jerrybrito) January 2, 2024

In particular, Jerry raised questions regarding the applicability and scenarios of the new regulation through several inquiries:

1. When miners or network validators receive block rewards exceeding $10,000, who should the sender's name or address be listed as?
2. If a user utilizes the exchange function "Swap" on a decentralized exchange and receives $10,000, is this required to be reported?
3. Is reporting necessary when sending cryptocurrency from a centralized exchange to a wallet?
4. If a user receives a cryptocurrency airdrop due to protocol interactions but is unsure if it exceeds $10,000 in value, who should they inquire with?
5. Does the IRS have a standard to measure whether the amount of cryptocurrency exceeds $10,000?

Furthermore, he mentioned that the reporting required by the law must be done in the form specified by the Treasury Department's "Form 8300," which is used for reporting "cash payments," but it has not been clearly explained how to report cryptocurrency income through this form.

Additionally, the form stipulates that it can only be sent to the Financial Crimes Enforcement Network (FinCEN) and IRS, but the former has no authority to collect reports on cryptocurrency transactions.

Jerry stated :

As of now, the Treasury Department's guidance is not clear, and I cannot find specific rules to follow.

Finally, Jerry emphasized that he will continue to take a firm stance in litigation with the Treasury Department to clarify how the law should be complied with.

Coin Center, an advocacy organization for cryptocurrency, sues the U.S. Treasury Department! Alleges that the infrastructure bill is unconstitutional and infringes on privacy and association rights

Miners and Wallet Providers Seem to Be in the Clear

Previously, the tax law sparked discussions due to the mention of "brokers" in the infrastructure bill, which would include exchanges and custodial wallets, obligating them to provide user data for taxation purposes.

However, the law did not clearly define "brokers," potentially causing confusion for miners or verification nodes who may fall within the regulatory scope, making it difficult for them to fill in the sender's information.

Nevertheless, the Treasury Department has confirmed that miners, wallet providers, and DeFi engineers are not intended to be included in the definition of brokers under the 60501 tax law. In other words, these individuals or entities may no longer need to worry about the KYC pressures stemming from the law.

Infrastructure Bill | U.S. Treasury Department: IRS Does Not Intend to Include Miners, Wallet Providers, DeFi Engineers as Brokers

Previously, at the time the law took effect, many lawmakers suggested creating additional regulations to make reporting requirements more comprehensive and believed that collecting data through brokers would be very difficult or almost impossible to achieve in full.

In August of this year, the IRS also planned to introduce new tax regulations for the cryptocurrency sector, set to be implemented by 2026, covering entities from cryptocurrency wallets, payment processors, centralized exchanges (CEX), to decentralized exchanges (DEX), potentially bringing them into the taxation scope.

It is understood that these companies will be required to track user gains and losses and assist in submitting tax information, posing a serious threat to the decentralized ecosystem.