Cryptocurrency Users Relieved As IRS Delays Form 8300 Reporting

Businesses that accept cryptocurrency as payment were relieved to learn that the IRS has delayed the requirement to report digital asset transactions exceeding $10,000 on Form 8300 until the Treasury provides more regulations.

Section 6050I of the Internal Revenue Code requires that any person who “engages in a trade or business” and who, “in the course of such business, receives more than $10,000 in cash in 1 transaction (or 2 or more related transactions) ” present FinCEN. Form 8300 to report the transaction. He Infrastructure Employment and Investment Act of 2021 expanded the definition of cash to include digital assets. The digital assets provision of the law went into effect on January 1, 2024 and created confusion bordering on panic among many cryptocurrency enthusiasts even though, according to Matt Metras, an EA who specializes in digital asset clients, “this has no impact on the casual investor or cryptocurrency user.”

Before the new guidance was issued, companies to which the new provision of the law applied could attempt to comply in good faith or take a much riskier “do nothing and wait for guidance” approach. Notice 2024-4 clarified that companies can delay reporting until new regulations are issued and was greeted with relief by many in the crypto industry.

The lack of regulatory guidance creates legitimate consternation among tax professionals serving clients in the crypto space. Tynisa Gaines, EA and Senior Project Manager at symbolic tax noted “Even though the Infrastructure Jobs and Investment Act of 2021 was passed two years ago, Form 8300 was updated in December 2023 and does not include digital assets.” A quick look at Part III, Line 32 of Form 8300 confirm this. The line lists types of cash such as U.S. currency, foreign currency, cashier's checks, money orders, bank drafts, and traveler's checks. Digital assets are not included. According to Gaines, “companies that receive payments in cryptocurrencies are not clear about which element to choose for a crypto transaction. Digital assets are not US currency, so that doesn't seem right. Is it foreign currency if my client is abroad?

Gaines notes: “As a crypto company, we can provide crypto reconciliations for clients who can file their own taxes or use their own preparer. Therefore, we do not have names, addresses or social security numbers for all customers.” Depending on the complexity and volume of transactions, the cost of a professional cryptocurrency reconciliation can easily reach four or five figures, and many companies that specialize in providing these reconciliations to clients also accept digital assets as payment. Preparing standalone cryptocurrency reconciliations without an associated tax return can be done without the investor providing any personally identifiable information to their provider. Asking privacy-obsessed cryptocurrency investors for the information needed to fill out Form 8300 can cause compliance-oriented companies to lose customers to companies that are willing to ignore the law, especially without specific Treasury guidance to fall back on.

The new law also poses problems for businesses such as digital art galleries. Although The NFT art market has cooled down (for now) a single NFT
NFTs
The purchase could easily trigger a Form 8300 reporting requirement for the artist or other seller when the sale is made entirely on the blockchain and largely anonymously. Despite cryptocurrency enthusiasts' insistence that blockchain transactions are completely anonymous, they can be traced if enough resources are allocated to the effort.

This is the second high-profile, unilateral delay of a new tax statute by the IRS. The other was the recent delay in the new lower Form 1099-K reporting threshold. The question arises as to whether the IRS has the legal authority to delay the implementation of laws passed by Congress even when the delay is welcome and perhaps when the law is well-intentioned but poorly drafted. It wouldn't be the first time Congress passes a law and leaves the IRS and others to work out the pesky details of its implementation (e.g., The Affordable Care Act).

IRC Section 7803 grants the IRS Commissioner relatively broad discretion to "administer, manage, conduct, direct, and supervise the execution and enforcement of the internal revenue laws or related tax statutes and conventions to which the United States is a party." However, it appears that the IRS may be selectively applying its powers to laws that it considers inconvenient to implement or too burdensome or, perhaps, beyond its understanding. According to Metras, who also teaches digital asset taxation to other tax professionals, the industry is still waiting for guidance on issues that predate the current one by more than a decade. In other words, now that the Notice says it's okay to wait for regulations, companies could have plenty of time to prepare for the reporting requirement.