IRS proposed a new tax law, which requires crypto traders to report crypto trades over $10k or go to jail, isn’t this complicated? While this appears to have massive implications for crypto users, who it might affect, and when, is not so straightforward. The opening days of 2024 have seen a resounding call echo across the far reaches of the cryptosphere: The IRS is coming! The IRS is coming! The hullabaloo was triggered by a circulated portion of a 2021 federal infrastructure law that states that beginning January 1, 2024, key details pertaining to certain crypto payments over $10,000 must be reported to the IRS under penalty of felony criminal charges. This includes the name, address, and social security number of the payer. Worry soon spread among crypto users unsure of whether they were now suddenly risking jail time by failing to report large on-chain transactions. But tax and policy experts advise calm. They say the law will likely not apply to the majority of crypto investors and NFT flippers. Moreover, they are emphatic that the statute is not currently in effect, and that it could be months, perhaps even years, away from actual enforcement. See Also: How Crypto Trader Made 56,000% Return On 4 Solana Tokens “There are open questions here, and these are going to have to be resolved,” Jason Schwartz, a tax partner and crypto specialist at law firm Fried Frank, told Decrypt. “But I don’t think that people should really be hand-wringing, because it’s fairly clear that the IRS is of the view that none of this applies just yet.” That’s a reference to statements made by the IRS, during ongoing litigation with crypto advocacy group Coin Center over the requirement, that the agency does not plan to enforce the law until a lengthy period of public comment and review takes place. So what exactly does the law require, and who does it apply to? The statute mandates that any person who receives at least $10,000 worth of crypto in the course of “trade or business” must report identifying information about who paid them that money. The same laws have long been enforced for cash transactions. Who the law might affect in crypto all comes down to what constitutes a financial transaction made in “trade or business”—a term of art in tax law which, while informed by decades of legal precedent, has no literal definition. “I think it’s quite clear that it applies to pretty much any transaction in which someone is, in exchange for a good or service, receiving over $10,000 worth of crypto assets,” Miller Whitehouse-Levine, CEO of the crypto lobbying group DeFi Education Fund, told Decrypt. But what does that mean in practice? If you’re an artist selling a $12,000 NFT, the rule probably does apply, Whitehouse-Levine says. If you’re an NFT collector reselling that same NFT for $20,000, it probably doesn’t. What about trading crypto? Whitehouse-Levine isn’t sure. The IRS website defines a trade or business as “an activity carried on…in good faith to make a profit.” That sounds an awful lot like flipping meme coins. But Jason Schwartz disagrees. He maintains that the IRS is inclined to only classify professional, full-time crypto market participants as traders—meaning the vast majority of crypto users would be exempt from the reporting obligation. “I would be very surprised if these reporting requirements applied to your typical crypto user, or even your so-called DeFi degen,” Jason said. “They’re just not doing this as their full-time job.” That doesn’t mean crypto’s in the clear. Schwartz thinks the law, if adopted and enforced, could spell untold amounts of trouble for individuals who receive payments from DAOs (what social security number do you put down for the payer?), crypto stakers (is running a node a business, and how do you list a home address for Ethereum?), and even crypto exchanges like Binance and Kraken, which the attorney says might have to begin documenting every single transfer onto their platforms exceeding $10,000. But he’s hopeful that these issues will be ironed out and addressed—in what he and other experts say is the lengthy period before the law is even enforced by the IRS. Is The Law Actually In Effect, Or Not? The amended IRS code in question—the same text circulating on Twitter—does plainly state an effective date of January 1, 2024. But recent legal developments have indicated that the IRS might be months, or even years, away from actually enforcing the law. The disconnect stems from the fact that crypto lobby group Coin Center, which says the new crypto tax law is unconstitutional, is currently suing the IRS to have it thrown out. And in a federal appeals court last month, Justice Department attorneys representing the IRS attempted to have the suit dismissed by declaring that the law does not automatically go into effect this year, and in fact won’t be enforced until a lengthy period of public comment and review is completed. Such a process might take years, according to DeFi Education Fund’s Whitehouse-Levine. A similar proposed IRS rule regarding crypto was first set forth in January 2022; two years and three rounds of public comment later, it has yet to become official IRS policy. “Assuming that the DOJ and Treasury are not lying to the Federal Circuit, who knows how long it will be,” Whitehouse-Levine said. “They haven’t even started [the] proposed rulemaking process.” Coin Center, which has maintained this week that the law is already in effect, acknowledged in a blog post that the Justice Department disagrees with that reading. But Jerry Brito, Coin Center’s executive director, says fixating on whether the law is technically in effect now is missing the point. “It kind of makes no sense to ask if a law is practically in effect,” Brito told Decrypt. “When the speed limit’s 55, and you’re pretty certain there are no cops around so you go 80, does the law practically exist?” He believes the threat posed by the IRS’s new tax law is here now, regardless of whether the federal agency says it’s enforcing the statute today, or a year from today. “The law is there, and you’re breaking it,” he continued. “Even if you’re almost certain you’re not going to get caught.” The post IRS: Report Crypto Trades Over $10K Or Face Jail appeared first on BitcoinWorld.