Corporate tax partner Charles Kolstad, who is on Withers’ cryptocurrency and digital assets legal team, was featured in the recent Tax Notes article, “Ramp Up Crypto Reporting Now, Say Tax Pros.” The article discusses the heavily debated definition of “broker” and how, after weeks of lobbying by the cryptocurrency industry, it is likely that the reporting rules will be enacted in the US’s Infrastructure Investment and Jobs Act (H.R. 3684) with no amendments to the definition of who qualifies as a broker. As such, the article says, taxpayers potentially subject to lawmakers’ proposed cryptocurrency broker reporting regime should start preparing now.
Open issues with crypto reporting rules
In the Tax Notes article, Charles says, “there are a lot of practical implementation issues that haven’t really been thought about yet that are going to create complications and disrupt businesses.” He notes that some taxpayers may need to add customer support personnel, or train existing staff, to explain the new rules and address any client inquiries.
Charles goes on to highlight that determining an appropriate valuation method for a cryptocurrency is an issue that needs to be addressed. “There can be dramatic swings in value during the day, so you can’t just use close-of-business price.”
He noted that there are service providers that can calculate the value of a cryptocurrency at an exact date and time. “But if there are four services that can value Ether or Ripple or whatever, how do you decide which one to use?” he asked. “Perhaps the IRS can simply say, whatever you pick you have to use on a consistent basis.”
For those subscribed to Tax Notes, the full article can be read here. Please note a subscription is required.
