On May 28, 2021, President Biden released some of the legislative items that would be added by his American Families Plan, which includes a provision that could impact tax information reporting for cryptocurrency asset exchanges and custodians. If enacted, this proposal could require substantial effort to implement and administer.
President Biden’s American Families Plan includes a provision which would for the first time require cryptocurrency asset exchanges and custodians to report financial information to the IRS on an annual Form 1099 information return. These reporting requirements would include cases in which taxpayers buy crypto assets from one broker and then transfer the crypto assets to another broker, and businesses that receive crypto assets in transactions with a fair market value greater than $10,000.
This compliance initiative would not begin until the 2023 tax year; however, it will take significant time in advance of this period for financial institutions to implement these requirements into their annual information reporting process.
A two-page summary of this provision which was released by the White House can be found here. We will continue to monitor this legislation and will publish an updated alert if this provision is included in the final American Families Plan. If you have any questions or concerns regarding the implementation of this proposed legislation, please contact one of the authors of this alert. We have experience in tax reporting by financial institutions, tax disputes and penalty resolution, and with respect to managing the implementation of new reporting requirements adopted by the IRS.