New US laws make it difficult for small businesses to accept crypto
The US is enacting new regulations that make accepting crypto a pain in the ass for small businesses.
It’s doing so via the Infrastructure Investment and Jobs Act, which expands reporting requirements for US-based individuals and businesses that transact in cryptocurrency.
The act became law on November 15, 2021. The Treasury’s Financial Crimes Enforcement Network (FinCEN) now also requires disclosure of crypto holdings in FinCEN Form 114 — the form already in use for foreign bank reporting.
Current rules dictate that taxpayers report any foreign account holding more than $10,000. FinCEN further intends to amend the Bank Secrecy Act to require disclosure of crypto holdings.
Not to mention, the Internal Revenue Service (IRS) demands US taxpayers declare their crypto portfolios on Schedule I of their 1040.
The IRS also added new reporting requirements for crypto transactions in tax Forms 8300 and 1099-B this year.
- Businesses typically use Form 8300 to report cash transactions exceeding $10,000.
- Banks similarly use this form to report deposits and withdrawals over $10,000.
- Brokers use Form 1099-B to report buying and selling of securities on their platforms.
Starting on January 1, 2024, brokers must report any crypto transaction they facilitated. It also expands the definition of “broker” to include crypto exchanges.
How to turn businesses off accepting crypto
The Infrastructure Investment and Jobs Act expands the term “cash” on Form 8300 to include “any digital representation of value.” Assets that use distributed ledger technology (like blockchain) are expressly included.
“Except as otherwise provided by the Secretary, the term ‘digital asset’ means any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.”
But this provides for Treasury Secretary Janet Yellen and her staff to unilaterally implement new crypto rules on bank accounts and cash transactions.
Any new reporting requirements will create additional burden for businesses to accept crypto payments.
Businesses bear the entire cost of regulatory compliance, including stiff penalties for failing to comply.
Read more: [Ignorance no excuse: IRS to hunt NFT tax cheats for billions of dollars]
Indeed, these new rules and regulations could create unfair challenges, no doubt causing some small businesses to opt out of accepting crypto. Crypto-forward industries might also reconsider digital asset merchant services.
Regardless, accountants and lawyers will happily collect fees to advise business owners on how to navigate the new regulatory landscape.
Business is always booming somewhere — even if crypto isn’t.
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