The U.S. treasury and internal revenue service (IRS) have rolled out new rules for reporting crypto tax in the country. The new rules will require brokers and exchanges to report certain sales on crypto from bitcoin to NFTs to close the tax gap and “ensure that everyone plays by the same set of rules.”
The rules are for now just proposed regulations, released today 25 August as part of the Infrastructure Investment and Jobs Act passed in 2021. The act includes crypto language to increase reporting made by brokers on customers’ crypto activity.
The proposed rules, if implemented, will treat crypto brokers the same way as brokers of traditional assets like stocks. The rules will supposedly also make it easier for crypto investors to calculate their gains using a new Form 1099-DA to help taxpayers figure out if they owe taxes under the proposed rules.
“These regulations 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 Treasury Department said in a statement.
Furthermore, the rules define brokers as platforms, payment processors and certain hosted wallets, probably including decentralized exchanges, thus requiring them to collect user information.
“This decision was made because the reasons for requiring information reporting on dispositions of digital assets do not depend on the manner by which a business operating a platform affects customers’ transactions,” the Treasury Department said.
IRS Targets $28 Billion in Ten Years
The IRS expects crypto brokers and exchanges to start reporting information on sales and exchanges of digital assets in 2025. According to the IRS projections, the agency can generate $28 billion over ten years if the rules are properly implemented,
in response privacy concerns on the rules, the Treasury and IRS have also called for opinions on better ideas. While comments on the rules are due on 30 October, the IRS will hold hearings on the proposal in November.
The new proposal is coming at a time when the U.S is cracking down on the crypto industry, without any clear regulatory guidelines for the industry. It therefore seems that though the U,S. isn’t interested in regulating the industry, it is interested in generating revenue from it.
Mixed Feelings on New Rules
The new proposed rules have been received with mixed feelings among crypto key players. Speaking on the rules, Blockchain Association CEO Kristin Smith said:
“If done correctly, these rules could help provide everyday crypto users with the necessary information to accurately comply with tax laws. However, it’s 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.”
Also speaking on the rules, The DeFi Education Fund CEO Miller Whitehouse-Levine said he wasn’t in support of the rules, and will be sending in comments.
“It attempts to apply regulatory frameworks predicated on the existence of intermediaries where they don’t exist, an ‘unsquarable’ circle that the proposal itself acknowledges,” he said.
“This approach won’t make filing taxes easier nor improve tax compliance, and we look forward to providing our comments as to why this proposal must be reconsidered,” he added.
