The exponential growth and rising cryptocurrencies have placed a demand on different countries to impose regulations that will protect the economy, customers, and businesses.
One such regulation is the Infrastructure Investment and Jobs Act or the Investment Bill, which President Biden signed into law on November 15, 2021.
The Investment Bill encompasses new reporting regulations set to affect the cryptocurrency market.
Cryptocurrency exchanges are regarded as brokers. This means that the reporting requirements imposed on traditional brokers now apply to crypto exchanges and affect how you prepare Form 8300.
What does this mean, and how does it affect you? Keep reading to find the answers below.
What Is Reporting Under Form 8300?
Prior to the new bill, cash reporting was limited to in-person cash transactions. But the Investment Bill’s definition of cash has been adjusted to include digital assets.
What that means is that transactions of cryptocurrencies and other digital assets are now regarded as cash. And so, any transactions of $10,000 or more in cryptocurrency must be reported to the IRS on Form 8300. The definition of cash as it pertains to Form 8300 includes a combination of US currency, foreign currency, bank checks, postal orders, and now cryptocurrency.
Simply put, any business or person that accepts a payment of $10,000 or more in cash must also include cryptocurrency, be it bitcoin or Ethereum, and will now be required by law to report this, including the identity of the transactor.
Form 8300 Reporting Requirements
Under the new legislation, cryptocurrency exchanges will be expected to collect various data to include in Form 8300.
This data will encompass:
- Personal details: this is everything about the individual or company that initiated the transaction, inclusive of their name, address, phone number, and taxpayer identification number
- Occupation: what the transactor does for work or if they are a company, what they do for business
- Where it applies, the party on whose behalf the transaction was completed must also be included in the form
- Transaction Details: finally, the form also demands a detailed description of the transaction in question
Penalties for Non-Reporting
Cryptocurrency brokers or exchanges who fail to report such “cash” transactions will be subject to several penalties from the IRS. The severity of the penalty will equal the extent of the crime.
For failure to report on time or for filing incorrect information, brokers can expect a minimum fine of $250 and a maximum of $3 million. But the IRS will reduce the penalties if brokers promptly correct their mistakes.
However, for intentional violations, the IRS promises no mercy. And will issue a fine of $25,000. For this type of violation, there is no maximum fine applicable.
But for what is deemed as a willful violation, in addition to the already enforced penalties, individuals who fail to report this transaction will be charged with a felony. The charge will result with either a fine of up to $25,000 and $100,000 for businesses or imprisonment for up to five years.
Form 8300 FAQs
If you have never completed any reporting, chances are, you have a few questions you want to be answered. And we have a few answers:
Who Should File Form 8300?
Any business, person, cooperation, trust, or even estate that has received $10,000 or more in cryptocurrency.
As long as you are within the United States and its territories, you are legally mandated to report Form 8300 to the IRS if you meet the criteria to do so.
When Should You File?
Form 8300 must be completed by the 15th day of the actual transaction. You will also be expected to file a statement including the details of the party with which you transacted. This would be the same party you included in Form 8300.
The statement should be filed within fifteen days from the transaction and is typically filed online.
What to Do Next?
Businesses or individuals who already receive $10,000 or more in cryptocurrency can already put systems in place to educate their employees on how to file Form 8300.
The Canna CPAs is a premier cannabis CPA and cannabis CFO firm. Our cannabis accountants can help you maintain compliance and maximize tax savings, profits, and cash flow. Call us today to learn more. 833-CPA-CANA -or 833-272-2262
Sandy Suchoff, CPA is the Founder and principal of Lefstein-Suchoff, CPA & Associates, LLC D/B/A The Canna CPAs. Suchoff has been featured and interviewed on MSNBC, FOX News, and Tune In Business Talk Radio as a tax advisor, as well as ONR Oklahoma PBS TV, Chasing News on FOX & WOR, KRQE 13, Cannabis Radio, Purple Haze Radio, and Cannabis Tech & Today as an advisor on cannabis tax and accounting.