President Joe Biden recently signed a $1.2 trillion bipartisan infrastructure bill, which includes some new crypto legislation to be aware of it.
Brokers, or bitcoin exchanges, will be required to issue a 1099-B under the new rule. In other words, crypto exchanges will now get compelled to report crypto transactions to the IRS immediately. “For many crypto investors, the bill will signal the end of hiding many gains,” says Grant Maddox, an independent CFP based in South Carolina.
Many crypto investors will face tax reporting issues as a result, according to Maddox. Because the exchanges reporting on trading activity will have a limited perspective into what these investors paid for crypto in the first place, the information reported to the IRS on the 1099 form for investors who use their crypto wallet may be prone to inaccuracies.
For crypto investors who wish to stay on the right side of the new regulation controlling their investments, there are two items to remember:
- Keep a detailed record of your cost basis — the price you paid for your bitcoin when you got it — so you may compare it to the figures reported to the IRS by the exchanges.
- Finding a tax professional that is conversant with crypto could help you declare your crypto investments more accurately. Be as transparent as possible about the cryptocurrencies you own and the amount you paid for them.
While the IRS previously recognized bitcoin to be taxable property, the new legislation’s specific reporting requirements raise the stakes for investors to ensure they are accurately and thoroughly reporting their activity.
“I believe a lot of people are in for a tax shock,” Maddox says. “This information will get tracked by the IRS, and there will be no evading the tax ramifications and gains immediately.”
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