Treasury Department to Require Crypto Brokers to Disclose User Transactions for IRS Reporting
The Treasury Department announced on Friday that most crypto brokers will be required to disclose users’ transaction proceeds to the Internal Revenue Service (IRS) starting in 2026. This new reporting requirement is aimed at curbing tax evasion through the cryptocurrency market.
The rule, which will go into effect in two years, mandates that crypto exchanges and payment processors like Coinbase report information on user sales and trades to the IRS. The IRS clarified that this rule is not a new tax, as cryptocurrency investors have always been required to pay taxes when selling their assets. The agency stated that the new rules are similar to those already in place for traditional financial services.
This move is seen as a way to prevent tax evasion on crypto platforms, where transactions can be linked to public addresses that are difficult to connect with specific traders. Additionally, crypto traders will now receive simple tax reporting forms each year, similar to investors in stocks and other traditional assets. This is a departure from the previous reliance on expensive and inaccurate service providers to estimate taxes owed.
There are exceptions to the new rule, with decentralized exchanges being excluded from having to report user transactions. However, the Treasury Department has indicated that it may consider additional reporting requirements for decentralized crypto exchanges in the future.
According to Deloitte, the reporting requirement is estimated to generate $28 billion in tax revenues for the federal government. Federal regulators have been seeking to regulate cryptocurrency firms for about a decade, with recent actions from agencies like the Securities and Exchange Commission targeting large crypto companies.
Overall, the new reporting requirement marks a significant step in regulating the cryptocurrency market and ensuring compliance with tax laws. Stay tuned for more updates on this developing story.
