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Compliance 5 min read Published Updated Credibility 91/100

Digital asset tax reporting

The Infrastructure Investment and Jobs Act expands IRS reporting to digital asset brokers, requiring Form 1099-B basis reporting and $10,000 digital asset payment disclosures from 2023 onward, driving urgent investments in tax data pipelines, customer diligence, and control frameworks.

Kodi C.

Editor & Research Lead

Verified for technical accuracy — Kodi C.

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Legislative Overview

The Infrastructure Investment and Jobs Act, signed into law on 15 November 2021, included provisions expanding tax information reporting requirements to digital asset transactions. Section 80603 amended the Internal Revenue Code to broaden the definition of "broker" to include persons who effectuate digital asset transfers, requiring these brokers to file information returns reporting gross proceeds from digital asset sales.

The provisions aim to improve tax compliance in the digital asset ecosystem by requiring reporting similar to that for securities transactions. Brokers will be required to report customer information including name, address, and taxpayer identification number, along with transaction details including gross proceeds and adjusted basis where available.

Definition of Broker

The expanded broker definition potentially includes a wide range of digital asset ecosystem participants beyond traditional exchanges. The legislation defines broker to include anyone responsible for and regularly providing services effectuating digital asset transfers on behalf of another person. The Treasury Department and IRS are tasked with issuing regulations further defining the scope of covered persons and transactions.

Industry teams have raised concerns about the breadth of the definition, particularly regarding its potential application to miners, validators, decentralized protocol developers, and others who may not have access to customer information required for reporting. Congressional efforts to clarify the definition have been proposed but not enacted as of the legislation's passage.

Reporting Requirements

Brokers must file information returns reporting digital asset transactions, similar to Form 1099-B used for securities. The returns must include gross proceeds from sales, and when basis reporting requirements take effect, brokers must also report adjusted basis and holding period information to enable accurate capital gains calculations.

Implementation timelines provide that the reporting requirements apply to returns required to be filed after December 31, 2023. Basis reporting requirements, which are more complex and require brokers to track cost basis across transactions, apply to returns required to be filed after December 31, 2025. These phased timelines provide setup runway for affected entities.

Compliance Implementation

Digital asset platforms should assess whether they fall within the expanded broker definition and prepare for reporting obligations. Implementation considerations include customer onboarding procedures to collect required information, transaction tracking systems to calculate gross proceeds and basis, and technology infrastructure to generate and file information returns.

If you are affected, also evaluate the implications for customer privacy, anti-money laundering compliance, and operational workflows. Coordination with legal and tax advisors helps stay compliant programs address both the statutory requirements and forthcoming regulatory guidance. Monitoring IRS rulemaking proceedings provides insight into how the agency interprets the legislation's scope and requirements.

Legislative Overview

The Infrastructure Investment and Jobs Act, signed into law on 15 November 2021, included provisions expanding tax information reporting requirements to digital asset transactions. Section 80603 amended the Internal Revenue Code to broaden the definition of broker to include persons who effectuate digital asset transfers, requiring these brokers to file information returns reporting gross proceeds from digital asset sales.

The provisions aim to improve tax compliance in the digital asset ecosystem by requiring reporting similar to that for securities transactions. Brokers will be required to report customer information including name, address, and taxpayer identification number, along with transaction details including gross proceeds and adjusted basis where available. The legislative intent focuses on closing perceived tax gaps in cryptocurrency transactions.

Definition of Broker

Industry teams have raised concerns about the breadth of the definition, particularly regarding its potential application to miners, validators, decentralized protocol developers, and software providers who may not have access to customer information required for reporting. Congressional efforts to clarify the definition have been proposed but not enacted as of the legislation's passage.

Reporting Requirements

Implementation timelines provide that the reporting requirements apply to returns required to be filed after December 31, 2023, for transactions occurring in 2023. Basis reporting requirements, which are more complex and require brokers to track cost basis across transactions, apply to returns required to be filed after December 31, 2025. These phased timelines provide setup runway for affected entities.

The IRS proposed regulations in 2023 providing detailed guidance on broker definitions, reporting obligations, and setup timelines. If you are affected, monitor final regulations and adjust compliance programs as needed.

Compliance Implementation

Digital asset platforms should assess whether they fall within the expanded broker definition and prepare for reporting obligations. Implementation considerations include customer onboarding procedures to collect required information, transaction tracking systems to calculate gross proceeds and basis, and technology infrastructure to generate and file information returns accurately and timely.

Tax reporting systems may require significant improvement to handle the volume and complexity of digital asset transactions. Integration with trading platforms, wallets, and custody solutions ensures full transaction capture. Customer communication programs should address new reporting requirements and information collection needs.

Future Outlook

The digital asset reporting environment continues to evolve as regulators refine setup guidance and industry practices mature. If you are affected, establish flexible compliance frameworks capable of adapting to regulatory changes while maintaining operational efficiency. early engagement with regulators and industry associations helps shape practical setup approaches.

Cross-industry collaboration supports development of common standards and good practices that benefit all market participants while meeting regulatory objectives for transparency and compliance.

Investment in compliance infrastructure supports long-term operational efficiency.

Reporting Obligations

Infrastructure Act provisions expand broker definition potentially capturing various cryptocurrency ecosystem participants. Form 1099 reporting requirements mandate transaction information disclosure to IRS. Implementation timeline and definitional clarity remain subject to Treasury rulemaking.

Industry Concerns

Broad broker definition potentially encompasses miners, validators, and decentralized protocol developers lacking customer information for reporting. Industry advocacy seeks narrow interpretation limiting obligations to entities with customer relationships. Technical impossibility arguments challenge requirements for decentralized participants.

Compliance Preparation

Covered entities should assess information collection capabilities and system requirements. Customer identification procedures may require enhancement. Monitoring Treasury rulemaking provides implementation guidance clarity.

See also

Selected articles on related subjects.

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Coverage intelligence

Published
Coverage pillar
Compliance
Source credibility
91/100 — high confidence
Topics
Digital asset tax reporting · Infrastructure Investment and Jobs Act · Broker definition compliance · Cost basis data governance · Section 6050I digital asset reporting · IRS regulatory readiness
Sources cited
3 sources (congress.gov, home.treasury.gov, fatf-gafi.org)
Reading time
5 min

Cited sources

  1. Infrastructure Investment and Jobs Act — congress.gov
  2. Treasury Digital Asset Guidance — treasury.gov
  3. FATF Virtual Asset Guidance — fatf-gafi.org
  • Digital asset tax reporting
  • Infrastructure Investment and Jobs Act
  • Broker definition compliance
  • Cost basis data governance
  • Section 6050I digital asset reporting
  • IRS regulatory readiness
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