FOR IMMEDIATE RELEASE
AICPA Continues Advocacy on Digital Assets with Recent Comments on Proposed Regulations for Broker Reporting Rules for Digital Asset Transactions
Washington, D.C. (December 5, 2023) – With the growth of the digital asset management market, the Internal Revenue Service (IRS) and the Department of the Treasury have released regulations and frequently asked questions (FAQs) on the taxation of digital assets. The American Institute of CPAs (AICPA) has submitted a number of comment letters and recommendations over the last several years on the tax treatment of digital assets, most recently on proposed regulations on section 6045 regarding gross proceeds and basis reporting by brokers and the determination of amount realized and basis for digital asset transactions.
The latest recommendations, made by AICPA’s Virtual Currency and Digital Assets Tax Task Force, addresses the following areas:
Basis tracking issues
Cost basis in determination of gain or loss and broker notification
Duplicate reporting
Penalty relief
Taxpayer privacy and need for a de minimis rule
Request for comments #44
Need for delay in effective date of Infrastructure Investment Jobs Act (IIJA) changes to section 6050I
The AICPA recommends the IRS and Treasury provide guidance on how taxpayers will comply with specific identification of digital assets when cryptocurrency tracking software generally provides neither a way to mark those digital assets nor incorporate those sales into gain and loss calculations.
Additionally, the AICPA requests that the IRS and Treasury provide a de minimis rule such that the new Form 1099-DA (digital assets) is not required to be filed by payment processors on purchases of $500 or less with such amount adjusted annually for inflation. In light of the complexity of these rules and the recommendations provided by the AICPA, the IRS and Treasury should provide penalty relief to both brokers required to file Form 1099-DA and to taxpayers who receive Form 1099-DA for the first three years that the final regulations for digital assets are in effect.
In a letter earlier this year, the AICPA sent recommendations to members of the Senate Finance Committee in response to the Committee’s request on taxation of digital assets. These comments were designed to help Congress better understand how to address the tax challenges and opportunities presented by digital assets. The AICPA asked that Congress clarify and provide guidance on specific digital assets by either adding a new safe harbor for foreign investors to understand whether their trading activities in the United States constitute a U.S. trade or business, or amend section 475 to add dealer of digital assets, similar to dealers in securities, to use mark to market method and provide guidance on which type of “digital asset” would fit under section 475.
“The issue of virtual currency taxation has been a very important issue to the AICPA and we have continued to monitor developments, including new rules and regulations, in this space,” said Reema Patel, Senior Manager, AICPA Tax Policy & Advocacy. “The trading volume of digital assets puts them in a separate and distinct asset group. AICPA’s advocacy and recommendations remain focused on increasing clarity and transparency for taxpayers and practitioners given the emerging tax issues with digital assets and we will continue to provide recommendations to meet that objective.”
About the American Institute of CPAs
The American Institute of CPAs® (AICPA®) is the world’s largest member association representing the CPA profession, with more than 421,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education, and consulting. AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.
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Contact: Veronica L. Vera
202-434-9215
Veronica.Vera@aicpa-cima.com
BACKGROUND:
July 28, 2023 – AICPA submitted comments on the digital asset question that is first appearing on the draft 2023 forms 1065, U.S. Return of Partnership Income (version dated June 23, 2023); 1120, U.S. Corporation Income Tax Return (version dated June 2, 2023); and draft 2023 form 1040, U.S. Individual Income Tax Return (version dated June 22, 2023), digital asset question.
June 16, 2023 – AICPA provided comments on Notice 2023-27 on the treatment of certain NFTs as collectibles under section 408(m).
April 14, 2023 – AICPA provided comments on needed guidance on the tax treatment of losses of digital assets.
February 17, 2023 – AICPA proposed FAQs for the IRS to consider posting on its website to assist taxpayers in responding to the new digital asset question on the 2022 Form 1040.
December 16, 2022 – AICPA submitted comments on digital assets, as referenced in the draft instructions to the 2022 Form 1040 requesting modifications to provide greater certainty to taxpayers and their preparers in confidently and properly complying with the question and overall reporting requirements for digital assets.
October 28, 2022 – AICPA commented on reporting virtual currency transactions under section 6045, section 6050I and the Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, and instructions.
August 29, 2022 – AICPA submitted comments on the virtual currency question on the 2021 Form 1040 and its variations, and draft 2022 Form 1040.
February 28, 2020 – AICPA submitted recommendations on the taxation of virtual currency transactions and the guidance regarding hard forks and airdrops.
May 30, 2018 – AICPA submitted updated recommendations on Notice 2014-21, Virtual Currency Guidance requesting immediate guidance regarding the tax treatment of virtual currency transactions.
June 10, 2016 – AICPA submitted comments in response to IRS guidance on how existing general tax principles apply to transactions using virtual currency.