Regulations on how cryptocurrency exchanges should report their client data to the IRS are still in preparation, as the US government hasn’t managed to release them according to the initial plan.
The US government is still working on regulations on third-party reporting for cryptocurrency trades. The transactions will be reported by crypto exchanges in accordance with Section 6045 of the Internal Revenue Code (IRC), a Treasury attorney said.
Cryptocurrency Exchanges Will Share Client Data as Stipulated in Section 6045
Erika Nijenhuis, senior counsel at the US Treasury’s Office of the International Tax Counsel, said in a webinar that the government was still preparing rules on third-party reporting for crypto transactions, which will oblige companies like Coinbase to report under Section 6045. The release time has been delayed after the government failed to provide clear guidance by June 2020, as initially planned.
The current version of IRC’s Section 6045 states that every broker must, when required by the Secretary, make a return and indicate the name and address of each customer, with additional details related to gross profits and other similar information.
Nijenhuis explained during a webcast held by the American Bar Association:
“That is our current focus because U.S. exchanges and other businesses play a significant role in the virtual currency transactions carried out by U.S. taxpayers. We think it’s appropriate, therefore, to focus on developing guidance for third-party reporting under Section 6045.”
Section 6045 says that brokers must file information returns on gross proceeds from the sale of covered securities, including commodities. But to this day, regulators haven’t decided whether cryptocurrencies are a commodity or not. If the government will decide to develop its new regulations around Section 6045, then crypto exchanges would share client data such as the adjusted basis, gain or loss, and whether it is long-term or short-term.