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The US recently revealed new tax reporting rules as Congress and regulatory authorities focus on crypto users who may not be paying tax on their crypto-related activities.
Reuters reports the US Treasury Department issued a proposed rule on Friday, under which crypto brokers, including exchange and payment processors, would have to register new information on users’ crypto transactions to the Internal Revenue Service (IRS) in as soon as two years.
Biden Administration Proposes New Crypto Tax Reporting Mechanisms
The IRS published proposed rules for crypto tax reporting on Friday, slated to give the industry its 1099 form. Under the proposed regulations, digital asset miners have been declared safe from future requirements.
According to the 300-page proposal, the Treasury Department clarified the definition of a “broker” in terms of the crypto industry. The department defined how crypto companies and investors must comply with new tax reporting obligations. The proposal also addresses the issue of whether DeFi platforms and miners need to collect their users’ personal data.
Treasury introduced a custom tax form for the industry called the “1099-DA” that brokers can file.
Notably, the proposal exempts crypto miners from the tax rules, but some DeFi platforms may not receive similar exemptions.
As the rules are still a proposal, it remains open to public commentary until October 30. The government must listen to participants in a set of public hearings scheduled for November 7 and 8. Treasury aims to have the rules for brokers take effect in 2025 for the 2026 tax filing season.
Treasury explained in a statement the goal of its proposed rules:
“This is part of a broader effort at Treasury to close the tax gap, address the tax evasion risks posed by digital assets, and help ensure that everyone plays by the same set of rules.”
The proposal has been met with criticism from the digital asset industry. CEO of the DeFi Education Fund, Miller Whitehouse-Levine, commented on the Treasury’s proposal and argued that it would not improve tax compliance nor would it make tax filings easier. He said in a statement:
“Today’s proposal from the IRS is confusing, self-refuting, and misguided. It attempts to apply regulatory frameworks predicated on the existence of intermediaries where they don’t exist.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.