By Michael Scott
The Internal Revenue Service (IRS) introduced proposed regulations to guide brokers in reporting the sale and exchange of digital assets. The federal agency involved in tax collection across the United States released new guidelines to simplify tax filing.
IRS is battling a salvo fired by the House Financial Service Committee (HFSC) chair Patrick McHenry, alleging the newly released rules advance the Biden Administration’s crackdown on digital assets.
IRS Draft Proposal Target Simplified Tax Assessment
The draft proposals conveyed by the IRS harmonize the reporting format, a move the agency portrays as inevitable to curb tax cheating. The guideline feature in the draft Form 1099-DA is designed to assist taxpayers in assessing if they owe taxes.
IRS guideline seeks to save taxpayers from dealing with complex calculations or procuring services to prepare their digital asset taxes. The Treasury Department added that Form 1099-DA simplifies the process to facilitate self-filing tax returns.
The Treasury observes that current legal provisions obligate taxpayers to declare tax liability on gains. The process involves deducting losses incurred when selling digital assets.
The majority of the taxpayers need help to calculate the gains realized from the activities in the digital asset ecosystem. Consequently, the Treasury considers the reporting rules timely to align the digital asset reporting with traditional assets.
The 282-long proposal will run within the Federal Register on Tuesday August 29. The Treasury indicates that the draft proposal constitutes a critical input by the Biden administration’s effort to implement the Infrastructure Investment and Jobs Act (IIJA). The bipartisan provisions target to net $28 billion additional tax revenue in the next decade.
The proposed rules are scheduled for enforcement in 2026, though to reflect the exchange and sales transactions executed by taxpayers in 2025. The Treasury’s statement invited comments towards the proposal amendment by October 30. It added that it intends to hold a hearing after the October deadline.
Blockchain Association Decry Camouflaged Provisions by IRS
The Blockchain Association chief executive Kristin Smith admitted that the initial reaction to the draft rules portrays probable submission of multiple comments towards the guideline. The industry advocacy group’s statement urged sobriety, considering that the crypto ecosystem differs from conventional assets.
Smith held that the existence of huge variances mandates customizing rules rather than belaboring the inclusion of participants who lack a pathway to boost compliance. He added that the advocacy group and members would readily submit their comments towards the draft proposal.
A Reuters publication cited a pronouncement by DeFi Education Fund chief executive Miller Whitehouse-Levine, who decried the confusing nature of the IRS. He observed that the draft proposal appears misguided and self-refuting. He considers the IRS as attempting to enforce regulatory frameworks formulated on the belief of intermediaries that are non-existent in reality.
The HFSC chair termed the proposal a camouflaged attempt by the Biden administration to wrestle the digital asset ecosystem. The House chair echoes the Blockchain Association statement that considers the proposed rules misguided.
House Finance Committee Chair Challenges IRS Proposal as Deficient
McHenry recited the submissions by the bipartisan members during the passage of IIJA that proposed rules should prioritize narrow, customization and clarity. The chair regretted that the IRS draft proposal disregards such a mandate, hence the need for reconsidered sobriety to amend the provisions.
McHenry expressed partial support for the proposal by reflecting on the provisions he co-authored with Representative Ritchie Torres in the Keep Innovation in America (KIA) Bill. He considers that the KIA bill aimed at fixing the poorly constructed reporting provisions for digital assets within the IIJA.
The attack on the IRS proposals on digital asset reporting coincides with various stakeholders rallying legislators to expedite the formulation of crypto-specific laws.
Recently, Coin Center aired its views on digital asset taxation in a letter penned to Senators Mike Crapo and Ron Wyden. The letter by the advocacy group emphasized the need to issue tailored guidelines for digital assets without compromising parties’ privacy.