IRS Extends Comment Period for Proposed Crypto Reporting Regulations
The Internal Revenue Service (IRS) has decided to extend the comment period for its proposed crypto reporting regulations by an additional two weeks. This move comes in response to the widespread interest and concern generated by the regulations. Stakeholders now have until November 13, 2023, to submit their comments, compared to the previous deadline of October 30, 2023.
According to the Treasury and IRS, the extension allows stakeholders more time to provide feedback on the proposed regulations. The announcement was made in an Oct. 25 Federal Register document, acknowledging the significant public interest in the rules since their August announcement.
The proposed regulations primarily focus on defining “brokers” in the crypto industry. This includes trading platforms, payment processors, digital asset-hosted wallet providers, and individuals who redeem digital assets they create or issue. However, individual miners and validators are exempted from being classified as “brokers.”
While this exemption is a relief for individual miners and validators, the proposed rules would impose additional compliance requirements on crypto companies. This has raised concerns among industry participants. Lawrence Zlatkin, the Vice President of Tax at Coinbase, expressed his concerns about the regulations, describing them as “incomprehensible and unduly burdensome” due to the new reporting requirements they would impose. He also highlighted the potential data overload the IRS could face, including transactions with “zero or negligible taxable income” under the proposed rules.
The Department of the Treasury and the IRS introduced the proposed regulations on August 25, 2023, with the aim of improving clarity and compliance for digital asset taxation. IRS Commissioner Danny Werfel emphasized that these regulations seek to eliminate confusion, establish clear reporting guidelines, and promote compliance with tax laws. The regulations would require crypto brokers to adhere to the same regulatory standards as securities brokers, including filing information returns and providing payee statements for all customers and traders.
Additionally, the Treasury is proposing the introduction of a new Form 1099-DA, specifically for reporting non-employment income from digital assets to customers and clients. This measure aims to assist taxpayers in effectively managing their tax obligations and providing them with a clearer understanding of their digital asset-related tax liabilities.
The extension of the comment period allows stakeholders more time to express their opinions on the proposed crypto reporting regulations. The IRS hopes that this additional time will result in valuable feedback that can help shape the final regulations.
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