January brings a new reporting requirement for digital asset transactions

An often overlooked tax law change that went into effect Jan. 1 is the new information reporting requirement for entities or individuals who receive digital assets with a fair market value (FMV) in excess of $10,000 in a transaction, or series of transactions, in the course of a trade or business. Recipients must report the transaction to the IRS and Financial Crimes Enforcement Network (FinCEN) using Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, within 15 days of receiving payments exceeding $10,000 in FMV.

The change in reporting requirements is the result of the 2021 Infrastructure Investment and Jobs Act’s expansion of the types of transactions that must be reported under §6050I. The definition of cash now includes digital assets defined in § 6045(g)(3)(D), which states that ‘digital assets’ means “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology.”

Form 8300 filing requirements

Form 8300 must be filed by an individual, company, corporation, partnership, association, trust or estate whenever they receive more than $10,000 in a single transaction, or two or more transactions in a related series of transactions, that occur within the 50 states, District of Columbia or U.S. possession or territory. Form 8300 must be filed electronically with FinCEN or in paper form with the IRS within 15 days after the date the transaction took place.

In addition to filing a Form 8300, the reporting individual or entity must provide a written statement to each party whose name was included on the form before Jan. 31 of the year following the reported transaction. The statement must include the name, address, contact person and telephone number of the filer, and the total amount reported. Failure to file a form within 15 days of the transaction or notify other parties listed on the Form 8300 by the end of the year may lead to substantial civil and criminal penalties.

Beginning Jan. 1, Forms 8300 must be e-filed if the filer is required to e-file their other information returns, including Forms W-2 and Forms 1099.