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Digital payments & assets customer tax reporting | Product growth scalability 🚀 | Risk mitigation ⚖ | Governance 🤝 | Tax SME 🧠 | Strategy consultant transforming CX disruptions caused by taxes
📣 Our deep-dive analysis at Ledgible is live on the final US #DigitalAsset #TaxReporting regulations. Spoiler: 🚨 digital asset platforms not providing hosted wallet services can still be in scope of gross proceeds and cost basis reporting. Final regulations, 2 transitional relief notices, and 1 revenue procedure were made public on June 28, 2024. Here’s our breakdown at Ledgible of 400+ pages with tables, diagrams, and implementation insights in the link: 📌 Definitions: broadly speaking, there is no change to the definitions in the final regulations. Final guidance for most decentralized exchanges and unhosted wallet providers is postponed. Definitions of Specified #NFTs, Qualifying #Stablecoins, and Tokenized Securities were added. The final regulations modify the definition of a Covered Security from “hosted wallet services” to “custodial services” in order to remain neutral on the method that the custodian uses to provide its services. This means that if a digital asset platform opens a hosted wallet for its customers through partner providers, like white-label wallet services of a third-party, then such digital asset platform will be treated as offering custodial services through an agent and broker gross proceeds and cost basis requirements will apply. Principals or agents to transactions can still be brokers, be wary of getting caught up in the plain use or SEC definition of the term “broker”. 📌 Timeline: most of the original timeline dates remain the same, but penalty relief can be available to brokers that do meet their obligations on time but can demonstrate that they used their best efforts to comply. Tracking of cost basis information has been postponed to begin January 1, 2026. 📌 Tax Withholding: phased in backup withholding requirements give brokers more time to document their customers on certified W-Forms. Final guidance for tax withholding on certain NFTs, PDAP payments, and real estate transactions is postponed. 📌 Reporting: the final regulations remove the requirement for brokers to report the time of disposals / transfers, the transaction ID or hash, and the wallet address on Form 1099. Collection and retention of some of this information can still apply. De minimis thresholds and aggregate reporting have been introduced for certain PDAP, Specified NFT, and Qualifying Stablecoin transactions. A complete exemption from reporting was introduced where certain Qualifying Stablecoins are exchanged to other non-Qualifying Stablecoin digital assets. 📌 VWAP Pricing Not Permitted: USD value at the time of the transaction is required to be reported and brokers are not permitted to use volume weighted average pricing (e.g. daily). This will be a heavy lift for brokers that do not currently record in their customer transaction records the USD pricing for digital asset exchanges (e.g. BTC to ETH). 🎉 Bonus feature: click "View the Whitepaper" for the Table of Contents version. #Crypto #CryptoTax #CARF