Saturday, 25 May 2024

Crypto News

IRS proposes unprecedented data-collection on crypto users

IRS proposes unprecedented data-collection on crypto users

For two years, the cryptocurrency world has been waiting to see how the Internal Revenue Service (IRS) would implement the Infrastructure Investment and Jobs Act. Put simply, this law established new reporting requirements that risked setting a de facto ban on cryptocurrency mining and exposing millions of Americans to new felony crimes. The good news is that the IRS’s nearly 300-page proposal is not quite as bad as it could have been under the law. However, that is far from saying it is good policy. 

As citizens, companies, and consultants finish crafting their comment letters ahead of the October 30 response deadline, it’s important to take a step back and recognize why businesses should not be required to report customers to the government by default.

Recalling back to 2021, the Infrastructure Investment and Jobs Act was about building roads, bridges, and the like — it was not about cryptocurrency or financial reporting. It wasn’t until funding was desperately needed to offset spending that members of Congress slipped in two provisions to increase financial surveillance over cryptocurrency users. Their argument was that increasing surveillance would increase tax revenue, effectively accusing cryptocurrency users of tax evasion.

Related: New tax rules could mean a US exodus for crypto companies

At the time, the Joint Committee on Taxation estimated that the provisions would yield around $28 billion in tax revenue over 1 years. Without a way to replace the funding, attempts to remove the controversial reporting requirements were ultimately rejected.

The $28 billion figure was questionable at the time. And less than a year later, the Biden administration released its budget, which contained a vastly different estimate. In contrast to the $28 billion estimated by the Joint Committee on Taxation, the Biden administration estimated that only $2 billion would be received over the next 10 years. And now, even that number might be an overestimation as Treasury officials acknowledged that the estimates were based on a very different market.

The IRS summary of its proposal for imposing new data-collection requirements on cryptocurrency service providers. Source: U.S. Federal Register

With cost-offsetting out the window, what is left appears to be little more than another brick in the wall of U.S. financial surveillance.

The IRS’s proposal, again, doesn’t seem as bad as it could have been since the proposal does exclude miners and some software…

Click Here to Read the Full Original Article at News…