New Bipartisan Infrastructure Bill 2021 Passed by The House

New Bipartisan Infrastructure Bill 2021 has been passed by the House, and President Biden will sign it on Monday. You know how it will affect crypto investors.

The US$1.2 trillion bipartisan infrastructure bill 2021 was passed by the House of Representatives late Friday. US President Joe Biden is scheduled to sign it on Monday (November 15, 2021). Many tax reporting provisions related to digital assets such as cryptocurrencies and NFTs (non-fungible tokens) are present in this legislation. 

If you are a cryptocurrency investor, you’ll be impacted in two potential ways:

  • Overstated 1099-Bs

The cryptocurrency exchanges and "brokers" are required by the bipartisan infrastructure bill 2021 to report their crypto gains in 1099 form. They will also have to disclose their customers’ names and addresses. As the term "broker" is too broad, the US  Treasury Department has earlier (in August 2021) had made it clear that the crypto "broker" category doesn’t include hardware developers, crypto miners, and others. 

A crypto exchange or broker will have to send a Form 1099-B to:

  • The Internal Revenue Service (IRS) and
  • Their customers

As a customer, you have to use the information from the 1099-B form to calculate your preliminary profits and losses. You've got to report crypto calculations on your tax return. 

CoinTracker’s certified public accountant and head of the tax strategy, Shehan Chandrasekera, has said regarding the provisions of the new bipartisan infrastructure bill that:

"These 1099s are going to be inaccurate for the most part, because these exchanges don’t have visibility into what you have in your self-custody wallet or what you’re doing in decentralized finance, or DeFi, applications."

However, this provision will still impact cryptocurrency investors, says Shehan Chandrasekera, a certified public accountant and head of tax strategy at cryptocurrency portfolio tracker and tax calculator CoinTracker. He also underscored the point that the calculation may get tricky if a bitcoin investor maintains both a self-custody wallet and a crypto exchange wallet. 

If a crypto investor buys BTC through Binance crypto exchange, transfers it into his self regulated wallet, and then transfers the same to Coinbase wallet to sell the BTC, it may lead to overstated 1099. 

Chandrasekera suggests that such inaccuracies (as they receive Form 1099 from their crypto exchanges) should be sorted out by the investors themselves. He said:

"They will have to talk to an accountant or use a tool to reconcile it and report the right amount."

  • Privacy and Surveillance

With the new Bipartisan Infrastructure Bill 2021 in place, the US tax code provision (6050I) now expands to include digital assets also. Section 6050I now requires you to file a report with the IRS if you receive over US$10,000 in cash or equivalents. 

This report will now have to include details about the name and social security number (SSN) of the person who paid you over US$10,000 in cash and equivalents. If you fail to report details of sending payments, it will be considered a felony offense. The same reporting has to be done by businesses and exchanges too, if they receive over US$10,000 in cryptocurrency.

Chandrasekera has pointed out that this provision will not put any direct burden on the end taxpayers but will affect their privacy. He went on to say:

"Say you buy a Tesla with one bitcoin valued at $60,000. The car seller, or business, has to collect your personal information, like your name, address, Social Security number, etc., so they can report that to the IRS.

Chandrasekera underscored:

"Crypto people are privacy conscious. Why would they want to give all their information to these businesses? Some of these businesses may not even have a good way to protect that private information. That could lead to other second- and third-order consequences."

The provisions of the new bipartisan infrastructure bill will take effect only in January 2024. Analysts believe that the lobbyists will definitely push for amendments and standalone bills to adjust the provisions.