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Just as the IRS received a suggestion to bring forward its proposed tax reporting guideline, Coinbase’s Vice President of Tax has called on the agency to revise the proposed rules, citing concerns over user privacy and an uneven playing field with traditional finance.
On Thursday, a letter was unveiled in which Lawrence Zlatkin, Vice President of Tax at crypto exchange Coinbase, called on the US Internal Revenue Service (IRS) to revise its proposed crypto tax reporting guidelines. Zlatkin criticized the proposed rules for imposing an “unprecedented, unchecked and unlimited tracking the daily lives of Americans.”
US Lawmakers Seek to Speed Up Tax Reporting Guidelines
Zlatkin refers to the IRS’s recent tax reporting guidelines, which the Biden Administration unveiled in August. In a 300-page proposal, the US Treasury Department issued a proposed rule under which crypto broken, including exchange and payment processors, would have to register new information on users’ transactions to the IRS within the next two years.
The proposed guidelines clarified the definition of a “broker” in terms of the crypto industry and defined how crypto companies and investors must comply with new tax reporting obligations. The proposal further addresses whether DeFi platforms and miners must collect their users’ personal data.
Despite criticism of the proposed guidelines, a group of seven US senators called on the IRS and Treasury Department to implement the proposed policies sooner rather than later. The proposed rules are set to take effect in 2026 for 2025 transactions. Members of the Senate argue the guidelines must be implemented “as swiftly as possible” to avoid the IRS potentially losing out on billions in annual tax revenue.
Zlatkin Disagrees With Proposed Rules
In his letter, Mr. Zlatkin stated the rules would require “government surveillance of the choices Americans make about their most private health care decisions, or even when they purchase a cup of coffee.”
Coinbase, already embroiled in a battle with the SEC, is calling on the IRS and Treasury to revise its proposed regulations. The exchange asked the regulators to limit compliance requirements to parties directly involved in digital asset transactions, similar to the traditional finance sector.
Coinbase also called for adequate time to develop complex compliance systems and explore possible blockchain solutions for tax reporting
The crypto exchange’s Tax VP highlighted in his letter concerns over the IRS being “bombarded with data.” He stated:
“The proposed regulations, as written, would impose an incomprehensible and unduly burdensome set of new reporting requirements.”
In a summary of the letter, Zlatkin highlighted six critical issues with the proposed guidelines:
- A lack of parity with financial services;
- Duplicative and Burdensome reporting;
- An invasion of privacy;
- A violation of tech neutrality;
- An unrealistic compliance timeline; and
- A missed opportunity to leverage blockchain to ensure taxpayer compliance.
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