It seems that every week a new proposal, opinion, ruling or requirement involving taxes and cryptocurrency rises to the surface of the industry discussion. Cryptocurrency is proving to be the catalyst to rewriting the tax code landscape at an ever-faster pace. 1099s are one of the latest to be impacted by the changes wrought by cryptocurrency.
The Accounting Blockchain Coalition (ABC) has gathered five experts for a webinar designed To help you navigate 1099 reporting requirements on January 31, 2020 at noon EST. Non-income Tax Reporting Challenges For Digital Assets And Blockchain Companies webinar will address recent changes and challenges in tax reporting and discuss what you can – and need — to do about them.
We caught up recently with our industry experts and they answered a few questions to give us a taste of what you can learn from the webinar. Listed below are ABC’s experts and what they had to say.
- Dmitri A. Alexeev, Partner, BPM LLP and ABC Taxation Working Group Co-chair
- Roger Brown, Head of Tax and Regulatory Affairs, Lukka, Inc.
- Shehan Chandrasekera, Head of Strategy, Tax, CoinTracker, and ABC Taxation Working Group Co-chair
- Pat Larsen, CEO and Co-founder, Zenledger.io
- Wendy Walker, Solution Principal, Sovos
Question: What’s the most important trend you are seeing in non-income tax reporting?
Roger Brown: IRS enforcement and compliance actions around cryptocurrency is putting a greater focus on tax reporting and compliance. If people don’t find religion, they will wish they had.
Pat Larsen: The Security Exchange Commission is continuing to go after Initial Coin Offerings. EOS, for example, is now a security creating implications on wash trading and taxes. IRS is sending out many thousands and thousands of letters and will be following up.
Wendy Walker: The biggest change in tax reporting impacting payers of digital asset income in the last year or so is the updated IRS guidance in Revenue Ruling 2019-24 and the related FAQs. It was the first time the IRS had released any formal guidance in five years and not only did they opine on specific transactions but they expanded the FAQs by adding more than 28 new scenarios. While there is still a lot of unanswered questions for payers of digital asset income and crypto investors alike, the guidance was a monumental step forward in clarifying many details that are fundamental to income tax.
Question: What’s the biggest change in non-income tax reporting for digital assets and blockchain companies over the last year or so?
Shehan Chandrasekera: No significant change, in my opinion over the last year. Some exchanges are trying to comply with 1099-B requirements. These are the ones founded by more finance-oriented vs. technology founders. Ex:- Gemini Vs. Coinbase. However, this is not possible because of the unique nature of this space. Exchanges cannot see offline transactions, wallets not connected to the exchanges or basis of assets transferred in/out by other exchanges; foreign and decentralized exchanges are not participating in non-income tax reporting, whatsoever. Form 1099-Ks are continued to be filed when the applicable thresholds are met.
Pat Larsen: The IRS Rev. Rul. 2019-24 was noteworthy in that it gives individuals the opportunity to use specific lot identification and use the Highest in, first out accounting method. More non-profits are being granted IRS status and the IRS has given non-profits some guidance on accepting crypto.
Wendy Walker: The most important trend that we see at Sovos is the controversy of some payers of digital asset income that are issuing the Form 1099-K and others are issuing the Form 1099-B for similar transactions. Although Notice 2014-21 and the new Rev. Ruling and the enforcement letters…all point taxpayers and practitioners to the existing rules and publications related to ‘property’ transactions that we generally associate with Form 1099-B, many payers are issuing the K. Since all 1099 forms drive a different path for a taxpayer, not only in the income tax filing process but also through the intertwining of the IRS return processing systems, the impacts of issuing one form or the other signal the immediate need for the IRS to release more precise guidance around the issue.
Question: What actionable items will webinar participants walk away with after the webinar?
Roger Brown: This webinar will provide a greater understanding of instances where 1099 reporting is required and what should be reported.
Shehan Chandrasekera: You will learn valuable information about the weaknesses in the existing virtual currency non-income tax reporting mechanism.
Wendy Walker: Participants will have a better understanding of the impacts of the different Forms 1099 issued related to digital asset transactions along with the reporting requirements associated with them. Whether it’s a practitioner, an investor or a payer of digital asset income, the webinar will provide a better understanding of what kinds of transactions give rise to the requirements to issue certain 1099 forms along with insights into some of the issues associated with who to issue forms to, when to issue forms, and how to accomplish issuing and filing data with the IRS.
Question: What actions do you want webinar participants to take after listening to the presentation?
Roger Brown: I hope webinar attendees perform a “gap” and risk analysis. This assesses what is clearly required under the rules, what their current practices are, what is uncertain, what risks are the company will to take, and what are the downsides if a company is wrong.
Pat Larsen: Update all their trading records now that 2019 trading is closed.
Shehan Chandrasekera: If there is one thing, I hope webinar attendees walk away from the presentation it’s to ask existing clients if they have any affiliation with virtual currencies. Also, look for tools that can help reconcile virtual currency transactions in the absence of Form 1099-B and 1099-K
Below is the webinar agenda outlining the topics to be discussed at Non-income Tax Reporting Challenges For Digital Assets And Blockchain Companies webinar
- 1099 general reporting requirements
- New IRS Virtual Currency Guidance: FAQ on Virtual Currency Transactions and Notice 2014-21
- Revenue Ruling 2019-24
- Impact on Business Filers
- Impact on Individual Filers
- Tax Controversy
- Industry Trends and Emerging Issues
- Best Practices
Learn more and sign-up today for the webinar: Non-income Tax Reporting Challenges For Digital Assets And Blockchain Companies