Crypto Reporting Takeaway from SIFMA Global Tax Reporting Symposium
What Have We Learned About Rules for Crypto Asset Tax Reporting?
On the 26 of October SIFMA and WSTEC held their Global Tax Reporting Symposium, thank you to Justin Sok and Ari Cohen for organizing a great agenda. One of the more interesting topics was Digital Assets.
Erika Nijenhuis, Senior Counsel, U.S. Department of the Treasury provided an update that the regulations for Information Reporting on Digital Assets are expected to be released this year, with 2 months left in the current year it will be interesting to see when they are proposed to go into effect.
Crypto Asset Tax Reporting Background
The Infrastructure Investment and Jobs Act passed into law in Nov 2021, outlined the requirements for information reporting of Crypto and Digital Assets. Digital Assets, except as otherwise provided by the Secretary, the term `digital asset' means any digital representation of value that is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.
The law requires that the brokers report the disposition of Digital Assets on Form 1099 including adjusted cost basis. The reporting was proposed to apply to transactions executed after December 31, 2023.
What Do You Need to Know?
The proposed regulations issued this year will be open for a comment period. Upon addressing comments final regulations will be released. Based on current timing the release of any final rules would leave less than 1 year to develop and deploy a solution.
Additionally many accounts that were not previously solicited for a W series form will now need to provide a form to identify US or Non-US status to clearly identify where reporting is required. Where forms are not provided presumption rules apply and reporting may be required on uncertified Non-US accounts.
Digital Assets expected to be within scope include;
Central Bank Digital Currencies
Non-Fungible Tokens (NFT)
Crypto Broker companies expected to be within scope include;
Digital Asset Platforms
Finally changes to the form 1099 may be introduced to capture the reporting of Digital Assets. This places a number of tasks that will need to be completed if the original effective date remains.
How Can TAINA Help?
With the growing number of Crypto accounts or wallet holders, automated compliance processes are key to ensuring compliance with the proposed crypto and digital asset reporting requirements. The regulatory framework will only grow from this point, therefore having automated systems that adapt and are easy to update is key to robust compliance.
TAINA is the market-leading, fully automated FATCA and CRS Validation Platform that is revolutionizing the way that financial institutions, crypto, and digital asset companies manage compliance.
TAINA’s advanced software can provide a streamlined process for solicitation, processing, and maintenance of the W Series forms from clients with Digital Assets and provides for withholding and information reporting information for your operational processes.
We would love to talk to you more about your compliance process and how our award-winning FATCA and CRS Validation platform may help you deal with the proposed Crypto and Digital Asset Reporting Requirements.
For more information get in touch or request a demo to see it in action.