The Biden administration releases new guidelines for Bitcoin tax filing.
The Internal Revenue Service will receive new information about user sales and swaps of digital assets from cryptocurrency brokers, including exchanges and payment processors, under a new rule that the US Treasury proposed and published on Friday.
The regulation is part of a larger effort by Congress and regulatory bodies to penalize Bitcoin users who might not be paying their taxes.
According to the Treasury Department, the proposed new tax reporting form, known as Form 1099-DA, will save cryptocurrency users from having to conduct complicated computations to estimate their revenues and will help taxpayers identify whether they owe taxes.
According to the Treasury Department, digital asset brokers will be subject to the same information reporting requirements as brokers for conventional financial instruments like bonds and equities.
According to the plan, centralized and decentralized digital asset trading platforms, cryptocurrency payment processors, and specific online wallets where users store digital assets would all fall under the description of "intermediary". The restriction will apply to non-fungible tokens as well as cryptocurrencies like Bitcoin and Ether.
To aid in the preparation of their taxes, brokers will need to deliver the papers to both the IRS and owners of digital assets.
The Infrastructure Investment and Jobs Act of 2021 contains a clause aimed at increasing tax reporting requirements for digital asset dealers, which is where the additional regulations come from.
The IRS has been tasked with locating businesses that meet the criteria for cryptocurrency brokers and with distributing the necessary documents and guidelines.
Additionally, it broadened the inclusion of digital assets in the reporting requirements for specific financial transactions above $10,000.
It was predicted at the time the bill was passed that the new regulations would generate close to $28 billion in revenue over ten years.
The IRS has been tasked with locating businesses that meet the criteria for cryptocurrency brokers and with distributing the necessary documents and guidelines.
Additionally, it broadened the inclusion of digital assets in the reporting requirements for specific financial transactions above $10,000.
It was predicted at the time the bill was passed that the new regulations would generate close to $28 billion in revenue over ten years.
The plan received a range of responses from the Bitcoin community. In a statement, the Blockchain Association's executive director, Kristin Smith, stated that if followed, the new regulations "may help provide everyday cryptocurrency users with the information needed to accurately comply with tax laws."
The suggested strategy, according to Miller Whitehouse Levin, CEO of the DeFi Education Fund, a lobbying organization specializing in decentralized finance, would not simplify tax filing or boost tax compliance.
"Today's proposal from the IRS is confusing, self-defeating, and misleading," he declared in a statement. He is attempting to enact regulatory frameworks based on fictitious intermediaries.
Currently, the IRS requires cryptocurrency users to file tax returns for a variety of digital asset-related activities, such as trading cryptocurrencies, regardless of whether the transactions generated profits or losses.
Users must perform this calculation on their own, and the exchanges that trade digital assets do not give the IRS this data.
Additionally, until October 30th, the Treasury and the IRS will accept opinions on the proposal. On November 7 and 8, they will also hold public hearings regarding the idea.
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