Proposed Regulations Require Brokers to Report Digital Asset Sales and Exchanges
Summary
This practice note discusses Proposed Regulations that the Treasury Department issued in August 2023 requiring extensive information reporting and potential backup withholding on brokers for sales or exchanges of digital assets (the "Proposed Regulations"). In an effort to modernize tax information reporting to reflect the rapid growth of digital assets, the Infrastructure Investment and Jobs Act established information reporting obligations on service providers who effect transfers of digital assets on behalf of another in return for consideration. 117 Pub L. No. 58, 2021 Enacted H.R. 3684, 117 Enacted H.R. 3684, 135 Stat. 429. With the Proposed Regulations, the Treasury Department has expanded the scope of such reporting, and taxpayers need to be aware of the implications and requirements.