So, crypto taxes just took a bit of a chill pill.
Never thought I'd say that.
Let's cover what's going on with these new
crypto tax laws, why they got disrupted, and
who it will impact.
Back in November 2021,
Biden signed this bill called the Infrastructure Investment
and Jobs Act, and it does a whole
lot of stuff rehabs roads, bridges, waterways,
spends more than
Seriously, ferries are mentioned 33 times in this bill.
Big ferry is all over this bill.
Anyways, this bill contains about
$550 billion in new spending and it was said to
be paid in part by crypto.
And that sounds flashy, but in reality, they plan to
pay for about 5% of it with new crypto
taxes over the course of several years.
The bill outlined a few new crypto laws that really
got the crypto community in a bit of an uproar
a little while back, but it turns out that might
not happen, at least for a while.
See, all these new laws are supposed to go into effect
So the next tax year, they'd start
collecting all of this crypto money and
finally the country can buy more ferries.
I mean, it's about time, America.
And maybe that won't happen.
I'll go more in depth in a minute, but
a whole lot more paperwork would need to be
sent to the IRS every year starting in 2023.
And exchanges are sitting there with
paperwork essentially up to the ceiling
saying this is an impossible task in that time.
Coinbase said they would need
at minimum two years to make this happen,
which is pretty crazy to think about, but
I suppose the layouts probably haven't helped.
I like to imagine that they just have
one guy left in their accounting department just
on the brink of mental breakdown.
He's tasked with sending, like 10
million customer reports to the IRS.
I don't envy that guy, but it's looking
like, yeah, this probably will be delayed.
But there hasn't been an official statement just yet.
However, essentially everyone in the know is like,
yeah, this is not going to happen.
The head of policy at the blockchain association
said, given the scope of work, we encourage
the treasury to extend the deadline.
And it turns out that there have been similar delays
with financial reporting laws like this in the past.
So it's not really a big leap for this to happen again.
Now, there's probably two questions
you're wondering right about now.
1. What are the laws that actually got delayed?
And 2. How can I commit tax evasion
from the comfort of my own home?
And unfortunately, I can only answer the
first one because YouTube demonetized me
last time I talked about crypto money laundering.
It wasn't financial advice, Youtube, okay?
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Okay, the laws, the big one is,
So let's look at the actual bill.
Here on page 912,
this mess of words basically says,
which means transfers
over $10,000 have to be reported.
But wait, there's more, because what this essentially means
is any platform that you use to transact on
with crypto will have much higher KYC requirements.
So goodbye are the days of anonymous exchanges.
That's why this is very likely being delayed.
But why does the IRS want all
this extra reporting and work anyways?
I mean, most people pay their crypto taxes
already, and big exchanges like FTX or
Coinbase already have tax information that they report.
Well, it turns out there's a big thing called
Basically, the IRS is doing this big
overhaul on all things, not just crypto,
in order to collect proper taxes.
They say that the tax gap between what they
actually receive, what they collect, and what they should
have received in 2019 was $600 billion.
They were $600 billion short somehow on tax collection.
And they believe that this is going to
increase to $7 trillion in the next decade
if they don't solve this right now.
What they found is that people pay
their proper taxes when they know a
secondary entity is also reporting their information.
Basically, the honor system doesn't work
so well in the US.
And I mean, how surprising is that?
This country was kind of founded on tax evasion,
but it turns out that when people estimate their own income on,
(crypto)
people only pay an estimated 45% of what's due.
Therefore, by making crypto exchanges report all trade,
customer, and income data, they think tax compliance
could reach that 99% accuracy number.
That, again, is very likely to be delayed.
Now, these laws have brought up two
issues that people are pretty salty about.
The first is record keeping.
Many crypto holders,
they might have a hardware wallet, a few
DeFi wallets, and a few centralized exchanges.
And in many instances, the exchange is
probably going to have some incorrect data.
Maybe the cost basis is wrong, or they
think there was some taxable event when perhaps
there wasn't, but they're forced to report all
of that, whether it's absolutely correct or not.
This means that you have to keep
meticulous records of your transactions in case
what's being reported is false.
That way you can say like, hey, no, this
is wrong because of XYZ.
Once this is all streamlined the whole system will
likely work better than it currently does because right
now crypto taxes are a total mess.
But the transition years now, probably 2024.
I expect things to be more difficult than ever.
There's actually even an entirely new 1099 dropping.
I know it's hardly the most
anticipated drop of the year.
The 1099-DA is currently in secret development.
I actually couldn't even find a picture of it, but
I'd be willing to bet it looks something like this.
And I'm also assuming that
DA stands for digital assets.
But don't quote me on that.
This is top secret stuff, so shh.
Now, this bill brought up another major piece
of contention in the crypto community, and that's
the definition of a crypto broker.
On page 911 of that monstrous bill, they
expand the definition of broker and it sounds
like they could tack that categorization on essentially
any crypto-based service, meaning not just crypto exchanges,
but also miners, DeFi operators, and stakepools.
That would be bad, very bad, because it
means that they too would need to collect
and report trade and customer information to the
IRS, essentially disrupting the whole point of DeFi.
Now, since that has happened, the treasury has reportedly
said that they're going to provide exemptions to businesses
who are not actually brokers, but people who are
still a bit uneasy on that point.
But all in all, it looks like this stuff
will likely be paused for at least another year.
And that means another year of crypto
billionaires lobbying the government for softer,
easier laws within the space.
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Now I'd like to thank you so much for watching.
I'm Max Maher, and I hope you have a profitable day!