Amendments to IRC Sec. 6050I Send the Crypto Industry Spinning
After two weeks off for the holidays, most people are easing back into the grind of everyday capitalism. However, with the amendments to IRC1 Section 6050I effective on January 1, 2024, the crypto industry is being hurtled into the pell-mell of sloppy regulation. It’s a tale of the government wanting more oversight over crypto but not telling its constituents how to comply.
Luckily, I received confirmation from an IRS agent on January 8, 2024 that the cryptoverse doesn’t have to spiral quite yet - there’s no space to denote digital asset transactions on Form 8300, so we have to wait for updated regs from the IRS. We don’t have any burden to file until the IRS.gov releases new guidance.
This article will dive into the existing Section 6050I provisions, how it theoretically changes on Jan 1 with crypto, and how to fill out Form 8300 for “normal” cash receipts (will likely be similar for crypto deposits).
What’s the Fuss About Section 6050I?
Section 6050I of the Internal Revenue Code is meant to prevent money laundering and other illicit activity through cash and cash-like instruments2. The IRS and FinCEN want details related to any cash transactions > $10,000, and they want this info within 15 days of the cash payment.
Section 6050I is enforced through Form 8300, which is filed any time a person (individual or business) receives $10,000 cash in the “course of a trade or business” (the cash can come from either a US or foreign person). The filing burden is on the entity who receives the cash, and they’re required to collect sensitive information about the party who is paying them, such as:
- TIN number (i.e. SSN for individuals and EIN for companies)
- Date of birth
- Identifying documentation i.e. passport number
The filing entity has to describe the nature of the transaction, whether related or multiple parties are involved, the dollar amount of the transaction, and when the cash was received. Certain types of cash transactions need to be reported, including:
- Personal property purchased
- Real property purchased
- Personal services provided
- Business services provided
- Intangible property purchased
- Debt obligations paid
- Exchange of cash
- Escrow or trust funds
- Bail received by court clerks
The filing entity is required to file this information within 15 days of receiving the money, has to keep records of Form 8300 for five years, and needs to provide a statement to any person identified on Form 8300 by January 31 of the following year. Receiving cash is onerous, which is why most businesses only accept electronic payments (which are easier to track and don’t need to be reported on Form 8300). Penalties for noncompliance are steep and include both civil and criminal consequences:
Coin Center wrote a detailed analysis of Section 6050I with examples and a brief history lesson on why we have this burdensome requirement in the first place (hint: Congress wants citizens to stop using cash and use the highly regulated banking industry instead). The analysis is a great segway into how 6050I affects digital assets, and how it discourages people from using this new tech.
How Does Crypto Play into This?
Per the Infrastructure Investment and Jobs Act, Section 6050I was amended to expand the definition of “cash” to include digital assets:
Section 6050I historically didn’t matter for crypto companies - after all, who’s paying for goods or services in dollar bills or foreign currency anymore? “Cash” excludes wire payments, ACH, Zello transfers, Venmo, etc (basically any electronic payments), so this wasn’t a concern. At Hash Basis, most of our customers use Mercury or Brex online banks, which are internet native and easily trackable via online records. With this update to 6050I, “cash” now includes digital assets, so if your company receives payment via crypto, Form 8300 has to be filed with the IRS. There’s a buckload of open questions since Form 8300 isn’t built for crypto transactions:
- What if I don’t know the TIN or address of the entity who paid $10,0003 worth of crypto? i.e. if they’re a DEX, protocol, random project with an airdrop
- What “identifying document” do I need?
- What section do I fill out in Part III since “crypto” isn’t listed as a payment method?
- How do I know what crypto transactions are considered “suspicious” and have to be reported even if their FMV is < $10,000?
- What constitutes a crypto trade or business for purposes of Form 8300? (This guidance from the IRS helps but it’s not crypto specific)
- Do I have to report to FinCEN in addition to the IRS? Only the IRS Section 6050I was amended, not FinCEN Section 5331 that requires the same reporting of Form 8300. → This is a major question since Form 8300 has to be e-filed with FinCEN as of January 1, 2024 as well. You can’t e-file just with the IRS.
As these questions indicate, it’s not clear how or with what government agency to file Form 8300 yet. I called the IRS to gain clarity on the matter, and they said digital asset transactions don’t have to be reported yet (since there’s no way to report them now!). They recommended I check IRS.gov for any updates since guidance is coming soon. Thank you IRS!
How Should Users Comply with Form 8300?
If you have digital assets, you don’t have to sweat just yet - the IRS confirmed to me that persons don’t have to file until the IRS releases new guidance and an updated Form 8300. For now, we recommend keeping a log of all transactions > $10,000 FMV in case the IRS makes Form 8300 filing retroactive instead of prospective.
To prepare for this inevitability, see below for how to fill out Form 8300 with a typical cash transaction. In our example, we are receiving $10,000 USD from a customer (a corporation) for accounting services rendered by Hash Basis.
How to Fill out Form 8300
- Create an account with the BSA E-Filing System (administered by FinCEN)
- Click “File Now”
- Make sure Adobe Reader / Acrobat Reader is installed (the PDF has to be opened in Adobe Reader)
- To download one form, click on “Download” under Discrete for Form 8300 - Report of Cash Payments Over $10,000 Received in a Trade or Business
- Fill out the interactive PDF (instructions in the video)
Overall, there’s been a lot of FUD around Form 8300, which seemed to pop up like a fresh daisy on January 1. However, Form 8300 only applies to those engaged in a trade or business, so most American individuals using crypto on the side / as a hobby aren’t affected. It’s also not required to be filed with the IRS or FinCEN yet.
If your entity will be affected eventually, we recommend starting the habit of compliance (via a detailed transaction log) since this amendment will be a reality in the future. We just have to wait & see how painful the IRS makes this new process!
- Article by EisnerAmper on new amendments
- IRS Form 8300
- IRS Form 8300 Instructions
- IRS help line for filling out Form 8300: 866-270-0733
- Coin Center article on January 1, 2024 requirements
- How to fill out Form 8300 (YouTube video)
- CryptoTaxGuy.eth Tweet
- TheCryptoCPA Tweet
- Article on new requirement to e-file Form 8300
 Internal Revenue Code
 These include cashier’s check, money order, bank drafts, traveler’s checks, etc. that have a face value of < $10,000 and are used in a “designated reporting transaction.” See the definition of “cash” in the IRS instructions for more information. Electronic payments such as wire transfers do not meet the definition of cash and don't need to be reported on Form 8300.
 Fair Market Value (FMV) at time of transfer (current price)