KPMG report: Planning implementation of broker digital asset reporting regulations
Key timeline considerations for brokers subject to a reporting requirement under final regulations
The U.S. Treasury Department and the IRS on June 28, 2024, issued final regulations on digital asset tax information reporting requirements. Read TaxNewsFlash
The final regulations generally require custodial brokers (i.e., brokers that take possession of the digital assets) to report gross proceeds to customers and the IRS beginning with sales occurring on or after January 1, 2025, and provide cost basis information on sales occurring on or after January 1, 2026 (for digital assets acquired on or after that date). Brokers subject to these reporting requirements include:
- Operators of custodial digital asset trading platforms
- Certain digital asset hosted wallet providers
- Digital asset kiosks
- Certain processors of digital asset payments (PDAPs)
The final regulations require broker reporting for certain dispositions of digital assets that are made in exchange for cash, different digital assets, stored-value cards, broker services, or property subject to existing broker reporting rules, or any other property in a payment transaction processed by a PDAP. For now, reporting is also generally limited only to U.S. digital asset brokers. Reporting for noncustodial brokers (e.g., certain DeFi platforms) is generally deferred until further guidance is issued. The Treasury stated in the preamble that such guidance would be issued “expeditiously.”
Industry participants will need to assess the applicability of these rules to their operations and consider how to implement these rules within the organization if they fall within the scope of a broker required to report on digital asset sales or payment transactions.
Read a July 2024 report prepared by KPMG LLP that discusses some of the key timeline considerations for brokers subject to a reporting requirement under these rules. It also provides a brief overview of certain transactions for which the Treasury and the IRS have provided transitional or other relief rules and exceptions, as these rules and exceptions may be important in planning implementation efforts.