Biden administration unveiled new tax reporting rules today. Cryptocurrency brokers, including exchanges and payment processors, would be required to provide detailed information about users’ sales and exchanges of digital assets to the Internal Revenue Service (IRS), according to a proposed rule by the U.S. Treasury Department.
The introduction of these rules aligns with a broader governmental effort to address potential tax evasion within the crypto sector.
The proposed tax reporting framework introduces a novel reporting form, Form 1099-DA, intended to streamline the tax determination process for crypto users.
By simplifying intricate calculations related to gains, the Treasury Department aims to facilitate accurate tax reporting while reducing complexity for taxpayers.
Central to the proposal is the expansion of the definition of a “broker” to encompass both centralized and decentralized digital asset trading platforms, crypto payment processors, and select online wallets used for storing digital assets.
This inclusive approach ensures comprehensive coverage of entities involved in cryptocurrency transactions, including cryptocurrencies like Bitcoin and Ethereum, as well as the burgeoning non-fungible token (NFT) market.
Brokers would be required to furnish Form 1099-DA to both the IRS and digital asset holders.
This streamlined reporting process seeks to empower users in preparing precise and compliant tax returns.
The initiative finds its roots in the $1 trillion 2021 Infrastructure Investment and Jobs Act, which sought to elevate tax reporting standards for digital asset brokers.
As a crucial extension, the legislation expanded reporting requirements for substantial cash transactions exceeding $10,000 to encompass digital assets.
The proposed rules have evoked diverse reactions from within the cryptocurrency industry.
While some industry stakeholders believe that the rules, if implemented effectively, could aid users in navigating tax obligations more accurately, others express skepticism, arguing that the proposed approach might not necessarily achieve improved tax compliance.
As the proposal enters the feedback phase, the Treasury Department and the IRS are open to input from stakeholders until October 30.
Public hearings on the proposal are scheduled for November 7-8, providing a platform for robust discussions about the potential impact and nuances of these rules.
The @USTreasury has unveiled a crypto tax proposal that exempts miners but includes some decentralized exchanges.
— CoinDesk (@CoinDesk) August 25, 2023
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