The Treasury has opted to extend the comment period for its proposed new rules on crypto reporting requirements by two weeks. Interested parties now have until mid-November to share their thoughts with the tax regulator.
The Treasury and Internal Revenue Service pushed back the comment deadline in response to the “strong public interest” the rule has received since first proposed in August, according to a Federal Register document scheduled to be published on Oct. 25.
The proposed rule, published in late August 2023, suggests defining digital asset “brokers” as “trading platforms, digital asset payment processors, certain digital asset hosted wallet providers and persons who regularly offer to redeem digital assets that were created or issued by that person.”
Notably, and to the delight of many industry members, the agencies exempt individual miners and validators from the “broker” classification. Still, the rules, if passed, would put added responsibilities on crypto companies many industry players find troubling.
“The proposed regulations, as written, would impose an incomprehensible and unduly burdensome set of new reporting requirements,” Lawrence Zlatkin, Coinbase’s vice president of tax, wrote in a comment letter earlier this month.
Zlatkin added that under the new rules, the IRS would be “bombarded with data,” including trivial transactions with “zero or negligible taxable income.”
Under the proposed rules, crypto brokers will have to adhere to the same rules as securities brokers, including filing information returns and furnishing payee statements for all customers and traders.
The Treasury is also calling for brokers to provide a new Form 1099-DA, a special form for reporting non-employment income from digital assets, to all customers and clients, in an effort to help taxpayers manage their tax obligations.
Carlo D’Angelo, a crypto criminal defense attorney, highlighted that the requirements exert significant pressure on businesses. He said that investors and clients should be advised that these regulations will impact their data.
“As currently drafted, these proposed regulations require consumers to disclose sensitive personal identifying information to any qualifying digital asset broker in order to effectuate a digital asset transaction,” D’Angelo wrote in his comment letter. “These digital asset brokers — who fall outside the scope of traditionally regulated securities brokers — would then be required to collect, store, and pass on that KYC (know your customer) information to the IRS in the form of a special 1099-DA reporting form.”
The Treasury and IRS were mandated in 2021 to draft the crypto regulations as part of President Biden’s Infrastructure Investment and Jobs Act.
The public hearing on Nov. 7 will proceed as scheduled, the agency said, and a second hearing will take place on Nov. 8 if there is enough demand. Requests to speak at the hearing must be submitted via email by Oct. 30, the agency said.
