IRS publishes transitional guidance for reporting of digital asset payments

On 16 January 2024, the US Internal Revenue Service (IRS) released Announcement 2024-4clarifying that, until regulations are published, no reporting is required where digital assets in excess of USD 10,000 are received in a single transaction (or multiple related transactions) under Internal Revenue Code (IRC) section 6050I.

IRC section 6050I requires any person who is engaged in a trade or business who receives “cash” in excess of USD 10,000 in one transaction (or multiple related transactions) in the course of their trade or business to file an information return reporting the receipt of said “cash.” Currently, a recipient of over USD 10,000 in cash reports such receipt to the IRS and to the payer on Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Reporting must be done within 15 days of the receipt of “cash.”

In 2021, section 80603(b)(3) of the Infrastructure Investment and Jobs Act updated the definition of “cash” in IRC section 6050I to include any digital asset, citing to the definition of digital asset in IRC section 6045(g)(3)(D). This update became effective on 1 January 2024. However, prior to Announcement 2024-4, no guidance was provided, and Form 8300 and the instructions do not currently address reporting of digital assets.

Announcement 2024-4 clarifies that the Treasury Department and the IRS intend to publish regulations addressing how IRC section 6050I applies to digital assets and to provide forms and instructions for the required reporting. The announcement clarifies that, until such regulations are published, no reporting under IRC section 6050I will be required for receipt of digital assets. Form 8300 reporting has not been suspended for other purposes, which means that persons who, in the course of their trade or business, receive cash in excess of USD 10,000 may still have reporting requirements. Finally, the announcement emphasizes that the relief provided by Announcement 2024-4 only applies for purposes of IRC section 6050I reporting and does not otherwise affect income tax obligations related to digital asset transactions.