IRS Reporting Bombshell: Final Crypto Broker Rules Revealed

IRS Reporting Bombshell Final Crypto Broker Rules Revealed

YEREVAN (CoinChapter.com) — The United States Internal Revenue Service (IRS) unveiled its final draft of new crypto broker reporting requirements on June 28. These regulations specify which industry participants must comply with the new rules. Notably, decentralized exchanges and self-custody wallets are not included under these reporting requirements.

The IRS reviewed numerous comments and complaints from industry stakeholders. It considered the complexities of decentralized networks. The IRS decided more time is needed to understand the nuances fully.

IRS Commissioner Comments on New Crypto Broker Rules. Source: IRS Final Crypto Broker Regulations Document

However, stablecoins and tokenized real-world assets are not exempt and will be treated the same as other digital assets under the new reporting rules.

First page of the Internal Revenue Service’s final broker rules. Source: IRS

IRS Chief Stresses Need to Close Digital Asset Tax Gap

IRS Commissioner Danny Werfel emphasized the importance of closing the tax gap posed by digital assets. He stated,

“We need to make sure digital assets are not used to hide taxable income. These final regulations will improve detection of noncompliance in the high-risk space of digital assets.”

Werfel’s colleague, criminal investigation chief Guy Ficco, predicted an increase in crypto tax evasion during the 2024 tax season. The IRS’s focus on third-party reporting aims to curb such activities and ensure better compliance.

Industry Groups Challenge New IRS Crypto Broker Rules

Industry advocacy groups have voiced significant concerns about the IRS’s new broker rules. The Blockchain Association and The Chamber of Digital Commerce have been vocal in their objections. They argue that the proposed rules are fundamentally incompatible with decentralized finance networks.

Blockchain Association Responds to Treasury’s Proposed Broker Rule. Source: Blockchain Association

In 2023, The Blockchain Association highlighted these issues. They stated that the new requirements would impose undue regulatory burdens and compliance costs. The Association estimated $256 billion in annual compliance costs. They argued that the rules violate the Paperwork Reduction Act.

The Chamber of Digital Commerce echoed these concerns. They claimed that the mandatory filing of billions of 1099-DA tax forms could create privacy issues. Both groups urged the IRS to reconsider these provisions.