Late final 12 months, the IRS issued discover that beginning Jan. 1, 2024, companies are required to electronically file (e-file) Kind 8300, Report of Money Funds Over $10,000, as an alternative of submitting a paper return.

Underneath the regulation, companies that obtain greater than $10,000 in money should report transactions to the U.S. authorities. Though many money transactions are legit, info reported on Varieties 8300 will help fight those that evade taxes, revenue from the drug commerce, interact in terrorist financing or conduct different felony actions. The federal government can usually hint cash from these unlawful actions via funds reported on Varieties 8300 which can be well timed filed, full and correct.

How the brand new cryptocurrency money reporting requirement might have an effect on your freelance enterprise

As a part of the steerage famous above, the IRS had initially said that digital belongings valued at $10,000 or extra are handled as “money” obtained for any individual partaking in a commerce or enterprise‍, it was inferred that cryptocurrency transactions could be included as a part of the $10,000 transactions.

As a reminder, the present regulation states that, “Any individual partaking in a commerce or enterprise that receives greater than $10,000 in money should file IRS Kind 8300 (”Report of Money Funds Over $10,000 Acquired in a Commerce or Business”).” With this kind you might be required to report: (1) the identify, tackle, and TIN of the individual from whom “money” was obtained; (2) the quantity of “money” obtained; and (3) the date and nature of the transaction.

The newly issued clarification does additionally try to make clear some ambiguity round cryptocurrency and whether or not that is included within the threshold quantity. It states that, “at this time, digital belongings will not be required to be included when figuring out whether or not money obtained in a single transaction (or two or extra associated transactions) meets the reporting threshold. The U.S. Division of the Treasury and IRS intend to prescribe laws to offer further info and procedures for reporting the receipt of digital belongings.”

The definition of a digital asset in keeping with the IRS is: “A digital illustration of value that’s recorded on a cryptographically secured, distributed ledger or any related expertise.” Underneath this definition,digital belongings embody:

• Convertible digital foreign money and cryptocurrency.
• Stablecoins.
• Non-fungible tokens (NFTs).

Be ready to report any crypto you commerce or settle for in your freelance enterprise funds.

As well as, bear in mind that each one people and companies should reply a query on their tax return about involvement with cryptocurrency. This questions is now relevant to most tax return varieties which isnew for the 2023 tax 12 months: 1041, U.S. Revenue Tax Return for Estates and Trusts; 1065, U.S. Return of Partnership Revenue; 1120, U.S. Company Revenue Tax Return; and 1120S, U.S. Revenue Tax Return for an S Company. See beneath for added particulars.

Freelancers coping with crypto of their companies should place a precedence on regulating digital currencies from a tax perspective. So long as you retain your crypto exercise well-documented and work with respected sellers and platforms, you shouldn’t have any points protecting in compliance with these new tax legal guidelines.

Everybody who recordsdata Varieties 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, 1120 and 1120S should test one field answering both “Sure” or “No” to the digital asset query. The query have to be answered by all taxpayers, not simply by those that engaged in a transaction involving digital belongings in 2023.

The query seems on the prime of Varieties 1040, Particular person Revenue Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Revenue Tax Return, and was revised this 12 months to replace the query requested. It was additionally added to Varieties 1041, U.S. Revenue Tax Return for Estates and Trusts; 1065, U.S. Return of Partnership Revenue; 1120, U.S. Company Revenue Tax Return; and 1120S, U.S. Revenue Tax Return for an S Firms.

It asks: “At any time throughout 2023, did you: (a) obtain (as a reward, award or cost for property or companies); or (b) sell, alternate, or in any other case eliminate a digital asset (or a financial curiosity in a digital asset)?”

For those who merely owned digital belongings throughout 2023 can test the “No” field so long as you didn’t interact in any transactions involving digital belongings throughout the 12 months or in case your actions had been restricted to a number of of the next:

• Holding digital belongings in a pockets or account;
• Transferring digital belongings from one pockets or account they personal or management to a different pockets or account they personal or management; or
• Buying digital belongings utilizing U.S. or different actual foreign money, together with via digital platforms.

For a set of incessantly requested questions (FAQs) and different particulars, go to the Digital Belongings web page on IRS.gov.

Your freelance enterprise should make a copy of each Kind 8300 it recordsdata, in addition to any supporting documentation and the required assertion it sends to prospects, for 5 years from the date filed. 

Submitting electronically will present a affirmation that the shape was filed; nonetheless, e-file affirmation emails alone don’t meet the report protecting requirement. When e-filing, filers should additionally save a duplicate of the shape previous to finalizing the shape submission. They need to affiliate the affirmation quantity with the saved copy. Previous to finalizing the shape for submission, companies ought to save a duplicate of the shape electronically or print a duplicate of the shape. 

For extra particulars please discuss with our earlier submit on reporting cryptocurrency in your freelance enterprise.