The Internal Revenue Service, the government body looking after tax collections in the US, recently rolled out a set of proposed regulations that would determine the sale and exchange of digital assets like cryptocurrency by brokers. As per the proposed regulations, brokers would have to use a new form for reporting that would simply tax filing and curb evasion.
Releasing an official statement, the US Treasury Department said that the proposed Form 1099-DA would help US citizens determine if they owe any taxes, do away with complicated calculations, and avoid paying for any digital asset tax preparation services.
In its statement, the treasury department stated that presently, taxpayers owe tax on gains and they are eligible for deducting losses on digital assets when they are sold. However, for many others, it’s difficult and expensive to calculate such gains.
The department also stated that the proposed rules would help in bringing digital asset reporting in line with regulations for other categories of assets.
The 282-page draft proposal is set to run in the Federal Register on August 29. The move is a part of the Joe Biden-led government’s efforts to implement the Infrastructure Investment and Jobs Act (IIJA), according to the department. The IIJA is expected to take in new tax revenue worth $28 billion over the next 10 years.
The proposed guidelines will be effective from 2026 onwards and will be reflected in exchanges and sales made in 2025. Any written comments on proposed regulations will be accepted till October 30. According to reports, at least one public hearing will be scheduled after the date.
Going by the initial reaction that the proposal has evoked, the IRS may have to face several concerns. The CEO of Blockchain Association, an industry advocacy group, Kristin Smith issued a statement and said that any new rules must be “tailored” for the crypto industry as crypto assets were very different from traditional ones. She also maintained that the proposed guidelines shouldn’t restrict ecosystem participants who don’t have a “pathway to compliance”.
A Reuters report quoted DeFi Education Fund CEO Miller Whitehouse-Levine to be saying that the proposed rules were “confusing, misguided, and self-refuting”. Whitehouse-Levine said the new guidelines seek to apply regulatory frameworks built for intermediaries that “don’t exist”. On the same lines, House of Representatives Financial Services Committee chairman Patrick McHenry described the proposal as another attack on the US digital asset ecosystem by the Biden administration.
Referring to the new rules as “misguided”, McHenry said that after the passage of IIJA, many lawmakers have made it clear that any new proposed rules should be “tailored and clear”. He also said he was happy to know that the proposed rule reflected the Keep Innovation in American Bill. McHenry had co-written the Bill with Rep. Ritchie Torres. McHenry went on to say that the Keep Innovation in American Bill strived to address the “poorly constructed provisions’ for reporting digital assets in the IIJA.
Meanwhile, Coin Centre, which is an advocacy group, recently wrote to Senators Mike Crapo and Ron Wyden and expressed its views about digital asset taxation guidelines. In its letter, Coin Center gave suggestions that were customized for digital assets and raised concerns about privacy. Once implemented, analysts feel that rules will impact both the live cryptocurrency prices and the Top 10 cryptocurrencies.
Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
