Cryptocurrency: The New King of Cash

Since 1985, Sec. 6050I of the Internal Revenue Code (IRC) mandates an information return for persons who receive more than $10,000 in cash in a transaction or a series of two or more related transactions, in their trade or business. This information reporting also exists in the Bank Secrecy Act of 1970 Section 5331. A “person” includes an individual, trust, estate, partnership, association, company, or corporation.[1] The form that is used to satisfy both reporting requirements is Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The purpose of this form was to enable the Treasury financial crimes division, also known as FinCEN, and the IRS to detect money laundering schemes. However, it has also allowed these institutions to identify individuals and businesses using cash income that has not been reported for income tax purposes.

Recently, and almost on an annual basis, the IRS has published news releases reminding and summarizing such requirements. Further, The Infrastructure Investment and Jobs Act,[2] signed into law on Nov. 15, 2021, modifies Sec. 6050I to include digital assets, including cryptocurrencies, in the definition of cash for purposes of Form 8300, which are received after December 31, 2023. Taxpayers have 15 days to file the information return once a reporting requirement occurs, as well as a requirement to provide a subsequent customer notice.

Understanding the requirements around form 8300 can be cumbersome and include identifying transactions subject to the requirements, general definition of “cash”, designating suspicious nature of the transaction, retention period of filings, the statute of limitations of these filings, and penalties for non-compliance. Also, as cryptocurrency becomes a more commonplace investment and payment method, record maintenance and training may be required to keep your business compliant and avoid unnecessary penalties. Taxpayers are already required to report portfolio activity for their Cryptocurrency investments and provide general disclosures in annual tax filings.

At Petrucelli, Piotrowski & Co., Inc our accounting professionals can educate and advise business owners and their employees on cash reporting requirements, help implement adequate procedures and provide education on the avoidance tactics, such as structuring. In addition, we can assist clients in creating procedure to maintain and track gains and losses from cryptocurrency investments. Contact us to learn more about the current and future requirements for accepting Cryptocurrency and cash.