Rob Massey, a partner at Deloitte with extensive experience advising clients on cryptocurrency taxation since 2012, outlined important developments in US Internal Revenue Service (IRS) tax gu
Rob Massey, a partner at Deloitte with extensive experience advising clients on cryptocurrency taxation since 2012, outlined important developments in US Internal Revenue Service (IRS) tax guidance for Bitcoin users. Despite evolving technical guidance, the IRS continues to rely on a self-assessment model, requiring taxpayers to report all Bitcoin transactions, regardless of the amount involved.
While the crypto market and related technology have rapidly changed, Massey emphasized that the IRS framework continues to treat Bitcoin transactions under a self-reporting regime. Specifically, any use of Bitcoin as money, including payments for goods and services, triggers potential tax implications as every transaction is considered a taxable realization event, even if the value involved is small.
Massey noted that “using Bitcoin as money creates new reporting challenges for taxpayers” since each wallet movement and payment may have different tax consequences. However, not all transfers between wallets constitute taxable events; it depends on whether ownership has actually changed.
Many Bitcoin transactions must be reported, no matter how small. The self-assessment system means taxpayers are responsible for recording all transactions involving Bitcoin, as no exemption has been made for minimal-value transactions.
The adoption of broker reporting requirements and the issuance of Form 1099 by crypto exchanges have expanded. However, Massey explained that these forms are unlikely to provide a complete record of an individual’s crypto activity. Investors frequently move assets across wallets and exchanges, so tax reporting must reconcile on-chain activity with exchange data.
He pointed out that brokers, such as exchanges, can only report activity they see, creating gaps in the comprehensive reporting of taxable events. This can leave taxpayers responsible for accurately tracking their basis and reporting gains or losses each time they spend, sell, or exchange Bitcoin.
According to Massey, one major request from the Bitcoin community should focus on the US Treasury providing clearer guidance on issues such as lending, lending-related income, the character of gains or losses, and tracking cost basis over time. He did not suggest repealing existing regulations but called for more clarity in areas that have become increasingly relevant as the market matures.
There is currently no de minimis exemption for crypto transactions, so users must report every taxable Bitcoin event, regardless of its size, to remain compliant with IRS rules.
Massey also addressed the complexities of cross-border Bitcoin use, noting that transactions can be subject to different rules, such as withholding requirements or the absence of applicable tax treaties. Multinational companies often compare Bitcoin and stablecoin solutions for moving value across international payment corridors, weighing regulatory and tax implications.
When it comes to business inquiries, Massey stated that current consultations focus on topics such as Bitcoin exchange-traded funds (ETFs), the use of leverage, and the taxation of Bitcoin lending activities. He advised business leaders to proactively seek guidance to remain compliant as regulations continue to change.
Mini dictionary: Deloitte is a global professional services firm that provides audit, consulting, tax, and advisory services to clients worldwide, including corporations and individuals navigating complex financial regulations and compliance issues.
Aspect 2024 IRS Guidance Traditional Asset Guidance Reporting Method Self-assessment, report all Bitcoin transactions Broker/third-party reporting for securities De Minimis Exemption Not available; report every transaction Available in some cases for small amountsMassey reiterated that for unresolved or potentially noncompliant past transactions, such as older Bitcoin purchases used for goods or services, taxpayers should consider consulting legal or accounting professionals to address disclosures and prove cost basis years after the event.
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