Crypto Firms Must Report Info On Trades To IRS Under New Anti-Tax Evasion Rule

Topline

The Treasury Department will require most crypto brokers to disclose the proceeds of users’ transactions to the Internal Revenue Service starting in two years, the agency said Friday, a reporting requirement introduced to curb tax evasion through the cryptocurrency market.

PARIS, FRANCE – APRIL 13: The requirement will begin in 2026. (Photo illustration by Chesnot/Getty … [+] Images)

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Key Facts

The rule, which goes into effect in 2026, requires crypto exchanges and payment processors like Coinbase to report information on user sales and trades to the IRS, according to a statement from the agency.

The IRS said the rule isn’t a new tax, noting cryptocurrency investors have always owed taxes when they sell their assets, and the new rules are “similar to those that already applied to traditional financial services.

The rule is being touted as a way of preventing tax evasion on crypto platforms, which can make the crime more accessible through the fact that transactions can be linked to public addresses that are tough to connect with particular traders.

The change also means crypto traders will get simple tax reporting forms each year like investors in stocks and other traditional assets, according to the Wall Street Journal, which notes crypto investors have historically relied on pricey and inaccurate service providers to get an estimate of the taxes they owe.

The new rule comes with exceptions, including one that excludes decentralized exchanges, which emphasize peer-to-peer trading without the use of intermediaries, from having to report user transactions.

However, the Treasury Department has indicated it will consider more reporting requirements this year designated for decentralized crypto exchanges, according to the statement.

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Big Number

$28 billion. That is how much money the reporting requirement is estimated to generate in tax revenues for the federal government, according to Deloitte.

Key Background

Federal regulators have sought to regulate cryptocurrency firms for about a decade. In the last few years, the Securities and Exchange Commission has thrusted lawsuits, charges and penalties against large crypto companies like Binance, Coinbase and FTX. The IRS has required crypto investors to report their transactions on their tax returns but has not had the power of a wide-reaching, regulatory net like the tax reporting rule approved Friday. Instead, tax authorities such as the IRS have reluctantly relied on summons to properly identify transactions that are of interest to them, according to Deloitte, which noted the challenge of regulating crypto is largely informed by the market’s constant changes.