The US Congress passed a $1.2 trillion infrastructure bill that will pave the way for crypto taxation and will also change the definition of a broker to include custodial crypto services as we are reading more in our crypto news today.
If the President approves the new bill, the IRS will be able to raise another $28 billion from taxing crypto. The US Congress passed the bill with a final vote 228-206. A few main areas regarding digital assets haven’t been clarified to the crypto users’ satisfaction. The US Congress passed the $1.2 trillion bill to improve America’s infrastructure via a variety of measures like taxing crypto brokers.
The bill that passed Congress with a final vote of 228-206, made a historic moment for crypto in the US, and in drafting the legislation, the senators inserted a provision that can change the IRS’s definition of a broker to include organizations that are trading crypto assets. This means that if the bill is signed off by the President, centralized exchanges such as Coinbase will be considered brokers and will be obliged to report their transactions directly to the IRS. The brokers will have to file 1099 forms that disclose the names and addresses of their customers and also, the government would be then able to raise an extra $28 billion in taxes through crypto as a result of the reporting requirements. When the bill was initially drafted, the crypto companies showed concern that the new definition of broker will even include crypto miners, wallet companies, or validators.
The whole ordeal started when the Senate rejected an amendment in August to exempt non-custodial crypto entities from the new tax reporting requirements and the Toomey-Warner-Lummis-Sinema-Portman amendment aimed to clarify that non-custodial actors like wallet providers, miners, and validators will not be required to report to the IRS. Senator Ted Cruz also asked for provisions on crypto to be dropped but Senator Shelby rejected the amendment.
Americans report their crypto gains to the IRS as with any investment but the POSA report argued that the bill will mean they will have to report the receival of digital assets worth over $10,000 by including the identity and social security number of the user that is making the payment. Failing to do so in 15 days will be considered a felony.