U.S. Senators Elizabeth Warren and Angus S. King, Jr. are pressing the U.S. Department of the Treasury and the Internal Revenue Service (IRS) to hasten the implementation of recently proposed tax reporting rules for cryptocurrency brokers.
In a joint letter addressed to the two regulators, the senators raised concerns over a two-year delay in enforcing the rules, expected to cost the federal government billions in tax revenue.
Experts estimate that the IRS lost roughly $50 billion annually as of 2022 due to crypto traders’ lack of understanding or intentional avoidance of tax implications.
New crypto tax rules
The lawmakers’ concern arises from the recently proposed regulation by the Treasury Department and the IRS, which aims to regulate the vast and complex world of cryptocurrency trading and tax reporting.
The senators lauded the substance of the proposed regulations — particularly the rule’s definition of “brokers” and “digital asset” — as they define brokers as any party that facilitates crypto sales while knowing the identity of the seller and the nature of the transaction.
Meanwhile, “digital asset” refers to a digital representation of value recorded on a cryptographically secure ledger or similar technology.
However, the lawmakers strongly opposed the slated 2026 effective date.
Billions in potential tax revenue
The senators argued that the delay contravenes the 2021 Infrastructure Investment and Jobs Act’s directive for new crypto broker reporting requirements on all tax returns filed from 2024.
They added that the Joint Committee on Taxation predicts these requirements could generate significant tax revenue in their initial years — funds that would be lost due to the delay.
The senators wrote:
“The time to act is now.”
The lawmakers highlighted that further delays could open doors for crypto lobbyists to undermine the government’s attempts to regulate the burgeoning and largely unmonitored sector.
Both Warren and King requested a swift implementation of the proposed rule and urged the agencies to update them on their efforts by Oct. 24, 2023.
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