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New cryptocurrency regulations require more diligent tracking

On Behalf of | Jan 4, 2022 | Federal And State Tax Collections |

Cryptocurrency has grown a following on the internet and in mainstream discourse over the last decade. It provides investors a secure, encrypted asset to speculate with and potentially make big gains. Many early fans called it the future of money and touted its decentralized and deregulated design.

Once the federal and state governments understood that potential gains lacked potential taxes, it was only a matter of time before those regulations kicked in.

Current and potential cryptocurrency regulations

As CNBC reports, both the November infrastructure bill and the Build Back Better Act aim to regulate digital assets somehow. The most recent bill signed into law establishes provisions on tax reporting for cryptocurrency and nonfungible tokens starting in 2024.

The Build Back Better Act likewise includes provisions as well as some limitations on how cryptocurrency investors may act with their digital property. Wash sale rules aim to keep investors from buying back the same asset after selling at a loss.

While the act reportedly seeks to enforce these wash sale rules in 2022, it is still unclear whether Congress will pass it.

Growing needs for tracking and defense

Cryptocurrency represents a useful asset in the digital future for individuals and companies alike. Lacking a good paper trail that sufficiently establishes any positions taken on tax returns risks unwanted audits or collections from the IRS.

Just because cryptocurrency is all digital does not ignore the possibility of a call from the Automated Collections System or a visit from a field revenue officer. New York investors and business owners have resources available to them when facing these new regulations, reports and even civil warrants.