US Senators Elizabeth Warren and Angus S. King, Jr. have called on the U.S. Department of the Treasury and the Internal Revenue Service (IRS) to speed up the implementation of new tax reporting rules for cryptocurrency brokers. In a joint letter to the regulators, the senators expressed concerns about a two-year delay in enforcing the rules, which is estimated to cost the federal government billions in tax revenue.
Experts believe that the IRS loses around $50 billion annually due to a lack of understanding or intentional avoidance of tax implications by crypto traders. To address this issue, the Treasury Department and the IRS proposed new regulations aimed at regulating cryptocurrency trading and tax reporting.
The senators praised the proposed regulations, particularly the definitions of “brokers” and “digital assets.” Under the rules, brokers would include any party that facilitates crypto sales while knowing the identity of the seller and the nature of the transaction. Digital assets are defined as digital representations of value recorded on a secure ledger.
However, the senators strongly opposed the planned effective date of 2026 for these regulations. They argued that this delay contradicts the directive in the 2021 Infrastructure Investment and Jobs Act, which requires new crypto broker reporting requirements on all tax returns filed from 2024. They emphasized that the delay would result in the loss of significant tax revenue that could have been generated in the initial years of implementation.
The senators also raised concerns that further delays could provide an opportunity for crypto lobbyists to undermine the government’s attempts to regulate the sector, which is currently largely unmonitored.
Both Warren and King called for a swift implementation of the proposed rules and requested updates from the agencies on their progress by October 24, 2023.
It is important for the Treasury and the IRS to address these concerns and expedite the implementation of the new tax reporting rules. With the rapid growth of the cryptocurrency market, it is crucial to ensure that individuals and businesses engaged in crypto trading are properly reporting their transactions and paying their taxes. By enforcing these regulations, the government can generate much-needed tax revenue and ensure a level playing field for all taxpayers. Additionally, swift implementation will help prevent the influence of special interest groups that may seek to impede the regulation of the crypto industry. The government must act now to protect the integrity of the tax system and promote transparency in the cryptocurrency market.