Saturday, 26 August 2023

US Wants “Brokers” to Man Taxpayers’ Crypto Reporting Burden

The US Department of Treasury alongside the Internal Revenue Service (IRS) today (Friday) announced new proposed rules for “brokers” such as crypto trading platforms, crypto payment processors and digital asset wallet providers. The agency noted that the proposed regulation will require these “brokers” to report certain crypto sales and exchange transactions.

US Aims at Tax Cheats

In a statement, the Treasury Department noted that the new regulation is part of efforts to implement President Joe Biden’s administration’s Infrastructure Investment and Jobs Act. The goal of the legislation, which has been signed into law and is also known as the Bipartisan Infrastructure Law, is to improve infrastructure in the United States and create jobs.

Specifically, the 282-page-long proposed regulation is targeted at combating tax evasion while helping compliant taxpayers determine how much they owe on their digital asset sale or exchange transactions.

“Under current law, taxpayers owe tax on gains and may be entitled to deduct losses on digital assets when sold, but for many taxpayers, it is difficult and costly to calculate their gains,” Treasury explained. “These proposed rules require brokers to provide a new Form 1099-DA to help taxpayers determine if they owe taxes, and would help taxpayers avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns.”

Furthermore, the Treasury explained that the new regulations will help to subject crypto brokers to the same tax reporting rules followed by those that deal in securities and other financial instruments. These rules also “align tax reporting on digital assets with tax reporting on other assets, and, as a result, avoid preferential treatment between different types of assets,” the agency said.

However, the proposed rules are not expected to come into force until 2016 when crypto brokers will be required to answer for transactions from the prior year. To continue work on the rules, the Treasury Department and IRS are accepting public comments on them until October 30, 2023.

Regulation Meets Resistance

However, the new rules have attracted criticism from both the political class and industry actors. In a statement released on Friday, Patric McHenry, the Chairman of the US House of Representatives' Financial Services Committee, picked holes in the proposal, calling it “another front in the Biden administration’s ongoing attack on the digital asset ecosystem.”

“The Biden Administration must end its effort to kill the digital asset ecosystem in the US and work with Congress to finally deliver clear rules of the road for this industry,” McHenry, who took over the Committee from Maxine Waters in January, stated.

“I look forward to advancing my bipartisan solution—the Keep Innovation in America Act—to fix these misguided reporting requirements, protect the privacy of market participants, and ensure the digital asset ecosystem can flourish here in the US,” the Chairman added.

In a post on X (formerly Twitter), Miller Whitehouse-Levine, the CEO of DeFi Education, described the proposal as “confusing” and “self-refuting”. He added that the rules “strains to find non-existent financial intermediaries in crypto.”

Additionally, Kristin Smith, the CEO of Blockchain Association, in a comment also published on X emphasized that it is “important to remember that the crypto ecosystem is very different from that of traditional assets, so the rules must be tailored accordingly and not capture ecosystem participants that don’t have a pathway to compliance.”

This article was written by Solomon Oladipupo at www.financemagnates.com.
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