Jonathan Medows is a NYC-based CPA who focuses on taxes for consultants throughout the nation. His website has a useful resource part with how-to articles and knowledge for freelancers. https://www.cpaforfreelancers.com/

If you’re working with cryptocurrency in your freelance enterprise, the brand new Division of the Treasury and the Inner Income Service proposed laws requiring brokers to report gross sales and exchanges of digital belongings by clients might influence you.

The proposed laws make clear the steerage utilized to a variety of digital asset points the place there have been questions, this consists of how brokers report proceeds to the IRS on new Kind 1099-DA.

The steerage aligns with the IRS compliance deal with rich taxpayers and can make sure that digital belongings are usually not used to cover taxable earnings.

The proposed revised laws from the IRS embrace:

1. For gross sales or exchanges of digital belongings that happen on or after Jan. 1, 2025, the proposed laws would require brokers, together with digital asset trading platforms, digital asset fee processors and sure digital asset hosted pockets suppliers, to report gross proceeds on a newly developed Kind 1099-DA and to supply payee statements to clients.

2. Brokers are additionally required to incorporate acquire or loss and foundation info for gross sales that happen on or after Jan. 1, 2026, on these info returns and statements, in order that clients have the data they should put together their tax returns.

3. The proposed laws require actual property reporting entities akin to title corporations, closing attorneys, mortgage lenders and actual property brokers, who’re handled as brokers for inclinations of digital belongings, to report the disposition of digital belongings paid as consideration by actual property purchasers in actual property transactions that shut on or after Jan. 1, 2025. The reporting requirement consists of Kind 1099-S for the honest market value of digital belongings paid to sellers of actual property in actual property transactions that shut on or after Jan. 1, 2025.

4. These proposed laws additionally acquire (or loss) computation guidelines, foundation willpower guidelines and backup withholding guidelines relevant to digital asset sale and alternate transactions and suggest many helpful definitions.

5. The brand new legislation states that the next info is now required to be reported to the IRS and to clients:

   A. Identify, deal with, and telephone variety of every buyer

   B. The gross proceeds from any sale of digital belongings; and

   C. Capital positive aspects or losses and whether or not such capital positive aspects or losses had been short-term (held for one yr or much less) or long-term (held for multiple yr).

   D. The laws doesn’t state what IRS varieties cryptocurrency exchanges should ship to their clients, nevertheless, the IRS has printed Proceeds From Broker and Barter Trade Transactions Kind 1099-B for this goal.

Clearly, the reporting necessities for cryptocurrency exchanges have develop into extra advanced. It’s important to just remember to observe and report your transactions precisely or face hefty fines. For instance, penalties for failure to report cryptocurrency exercise will price you. The legislation lays out that exchanges which fail to report the data above will likely be topic to a $250 penalty per buyer, as much as a maximum $3 million penalty.