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It's a Brave New Digital World: FinCEN and the IRS Now Require the Filing of Form 8300 for the Receipt of Cryptocurrency
Thursday, January 25, 2024

While cryptocurrency has been around since as far back as 2009, it didn’t become acceptable as a common form of payment until the mid-2010s. It seemed inevitable that at some point the banking industry or the US government would get involved in the regulation of cryptocurrency and corresponding reporting requirements.

Well, that time has now arrived. In 2021, Congress passed legislation amending the definition of digital assets. That legislation added the following definition and reporting requirements: “digital asset (as defined in section 6045(g)(3)(D))” is now treated as cash, and accepting a digital asset, according to Internal Revenue Code Section 6050I, requires any person who is “engaged in a trade or business” and who, “in the course of such business, receives more than $10,000 in cash in 1 transaction (or 2 or more related transactions)” to file Financial Crimes Enforcement Network (FinCEN) Form 8300 to report the transaction. The effective date of the reporting requirements triggered by this definitional change was January 1, 2024.

When is my cryptocurrency worth more than $10,000?

Like stocks, the value of cryptocurrency varies daily, sometimes by the hour or minute. That is not the same for cash, cashier’s checks, money orders, bank drafts, or traveler’s checks — all forms of “cash” listed in line 32 of Form 8300. So the value of those forms of “cash” remains the same as at the time you receive them.

But hours or minutes after you take receipt of the cryptocurrency, its value could increase or decrease. In IRS Notice 2014-21, the IRS provides the following guidance to taxpayers: “A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received” (emphasis added). A conservative approach would dictate that for reporting purposes, you should use the value of the cryptocurrency as of 11:59 p.m. on the calendar day that you received it as a cash payment in a trade or business.

What am I required to do now, and how do I do that?

You might have to file your Form 8300 electronically. In addition to the new reporting requirements for cryptocurrency, also effective January 1, 2024, the IRS is requiring that you electronically file (e-file) Form 8300 if you’re required to e-file other information returns, such as Form 1099 series and Form W-2. You must e-file your Forms 8300 if you’re required to file at least 10 information returns of one or more type(s) other than Form 8300 during a calendar year. To e-file Form 8300, a business must set up an account with FinCEN’s BSA E-Filing System.

For example, if you’re required to file five Forms W-2 and five Forms 1099-INT, then you’re also required to e-file certain other information returns during that year, including any Forms 8300. However, if you file less than 10 total information returns other than Forms 8300, you’re not required to e-file the information returns and you are not required to e-file any Form 8300. Conversely, the number of Forms 8300 you file does not affect the e-filing requirement. Therefore, if you do not file any other information returns, besides a Form 8300, then you are not mandated to e-file your Forms 8300.

Nevertheless, even if you’re not required to e-file, you can still choose to.

Can I get a waiver of the electronic requirement?

Yes, you can. The IRS offers waivers due to undue hardship. If the IRS grants you a waiver from e-filing information returns, the waiver automatically applies to all Forms 8300 for the duration of the calendar year. Keep in mind that waivers for e-filing are not required when a business files less than 10 total information returns other than Forms 8300.

Is there a penalty for paper filing?

Of course there is. If you are required to e-file but file by paper and don’t have a waiver, you will be subject to a failure to file penalty.

How does this affect my recordkeeping?

You are required to keep copies of Form 8300 for five years. When e-filing, make sure to save a copy of the form before you submit it. Confirmation receipts don’t meet the recordkeeping requirement. You should associate the confirmation number with the saved copy.

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