IRS Proposes Regulations for Digital Asset Reporting to Simplify Tax Filing and Combat Tax Cheating
Summary:
The IRS has proposed regulations for digital asset reporting by brokers, aiming to simplify tax filing and combat tax cheating. The proposed rules require brokers to use a new form to report digital asset sales and exchanges. The regulations align digital asset reporting with other asset types and are part of the Biden administration's implementation of the Infrastructure Investment and Jobs Act. Public comments on the proposal are being accepted until October 30. Critics argue that the rules should be tailored to accommodate the unique aspects of the crypto ecosystem.
The IRS, the government agency responsible for tax collection in the United States, has released proposed regulations regarding the sale and exchange of digital assets by brokers. These rules aim to simplify tax filing and reduce tax cheating by requiring brokers to use a new form for reporting. The proposed Form 1099-DA would assist taxpayers in determining their tax obligations and avoid complicated calculations or the need for digital asset tax preparation services. The Treasury Department has stated that the current tax laws are challenging and costly for many taxpayers to calculate their gains on digital assets.
According to the Treasury, these regulations align the reporting of digital assets with other types of assets. The draft proposal, spanning 282 pages, is set to be published in the Federal Register on August 29. It is part of the Biden administration's implementation of the Infrastructure Investment and Jobs Act (IIJA), which is projected to generate $28 billion in new tax revenue over a decade.
The proposed rules are expected to take effect in 2026, reflecting sales and exchanges conducted in 2025. The public has until October 30 to submit written comments on the proposal, and at least one public hearing will be held thereafter.
Initial reactions to the proposal suggest that the IRS may receive numerous comments. Kristin Smith, CEO of the Blockchain Association, emphasized the need for tailored rules that accommodate the unique characteristics of the crypto ecosystem. The Blockchain Association and its members look forward to providing their feedback. DeFi Education Fund CEO Miller Whitehouse-Levine criticized the proposal, calling it confusing, self-contradictory, and misguided, arguing that it applies regulatory frameworks where intermediaries do not exist.
Chairman Patrick McHenry of the House of Representatives Financial Services Committee labeled the proposal as yet another attack on the digital asset ecosystem by the Biden Administration. McHenry criticized the proposed rules as misguided and emphasized the importance of narrow, clear, and tailored regulations, as lawmakers had stated after passing the IIJA. He also mentioned his satisfaction that exemptions in the proposal align with those in the Keep Innovation in America bill, which he co-authored with Rep. Ritchie Torres. This bill aims to address the flaws in the digital asset reporting provisions of the IIJA.
Coin Center, an advocacy group, recently sent a letter to Sens. Ron Wyden and Mike Crapo, providing suggestions specifically tailored to digital asset taxation while raising privacy concerns.
Published At
8/25/2023 4:40:00 PM
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