Democrat senators want Treasury, IRS to pick up the pace on new crypto tax rules
A group of Democratic senators sent a letter to the US Department of Treasury and the Internal Revenue Service asking for information on when new cryptocurrency tax guidance will come as a deadline quickly approaches.
Sens. Elizabeth Warren, D-Mass., Bernie Sanders, D-Vt., Robert Casey, D-Penn., and Richard Blumenthal, D-Conn., sent the letter Tuesday.
Under the Infrastructure Investment and Jobs Act, signed into law in November 2021, the Treasury and IRS have until the end of this year to finalize new rules to help close an estimated “$50 billion crypto tax gap,” the letter said.
“Without quick action, your agencies are at risk of failing to meet their congressionally-mandated deadlines for implementation of a final rule,” senators wrote in the letter. “We urge you to act swiftly to implement strong tax reporting rules for cryptocurrency brokers.”
The crypto industry has also become antsy waiting for guidance, particularly with regards to how the IRS defines a “broker.” Industry observers have claimed the broker definition is broad enough to potentially include miners and software developers. This classification could pose challenges in meeting regulatory disclosure obligations for these entities, those people say.
“What we are hoping, from an industry perspective, is that the updated 6045 regulations will have different qualifications based on the type of activity,” Erin Fennimore, vice president of tax solutions at TaxBit, said. “It will hopefully make it clear that not everyone effectuating a transfer of a digital asset should be subjected to broker reporting.”
The new regulations will be issued under Sections 6045 and 6045A, according to an announcement from the IRS earlier this year.
The senatorial letter comes days after the IRS issued new guidelines, updating Section 6045 regarding crypto staking, in which the agency ruled that staking income — regardless of if the gains are realized — will be taxed as income.
“If a cash-method taxpayer stakes cryptocurrency native to a proof-of-stake blockchain and receives additional units of cryptocurrency as rewards when validation occurs, the fair market value of the validation rewards received is included in the taxpayer’s gross income in the taxable year,” the IRS’ rule states.
The senators ask that the agencies inform them on their timeline for issuing rules and how long members from the public will be able to comment on new rule proposals.
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