Cryptocurrency is making the news every single day for a myriad of reasons. I wanted to shed light on one important update that might have gotten lost in the weeds:
beginning January 1st, 2024, tax information reporting for cryptocurrency transactions will experience a significant expansion. This new development stems from President Biden’s Infrastructure Investment and Jobs Act (the “Infrastructure Bill”), signed in November 2021.
The Infrastructure Bill also addresses potential attempts to bypass this requirement by splitting transactions. It provides that any instances where a transaction is split into smaller payments is considered a related party transaction. Thus, any attempt to dodge this requirement is futile and illegal.
The mechanism to report this information is IRS Form 8300. Historically, this form was used to report cash payments exceeding $10,000 and was applicable to various forms of payment, including currency, cashier’s checks, traveler’s checks, and more. Form 8300 aids the IRS in tracking large amounts of cash changing hands. However, starting January 1st, 2024, cryptocurrency transactions, in the course of business or trade, amounting to $10,000 or more will also come under this regulation.
Key information you’ll be asked to provide:
- Name, address, and social security number (SSN) or taxpayer identification number (TIN) of the individual or business receiving the payment.
- Name and contact information of the person making the payment.
- Date and amount of the cash payment.
- A brief description of the transaction or the goods or services involved.
How and When to File
It is noteworthy to mention that this form must be filed within 15 days following the date of the transaction. Additionally, a written statement must be provided to the individual or organization named in the form by January 31 of the subsequent year.
Penalties for Non-Compliance
Non-compliance with these requirements carries severe penalties. Entities failing to report this information and provide the necessary written statement may face both civil and criminal repercussions. If convicted of a felony for non-compliance, individuals can be fined up to $25,000, a figure which increases to $100,000 for corporations, or face imprisonment for up to 5 years.
Understanding these new rules surrounding Form 8300 and cryptocurrency transactions is crucial for any business owner or trader transacting in cryptocurrency. Proper compliance is not just a matter of legal responsibility but also a matter of financial security! If you have questions about whether your business may need to file Form 8300, reach out to our team at Campbell Teague.