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Blockchain Association Criticizes IRS Proposed Broker Rule
The Blockchain Association submitted a comment letter under the Paperwork Reduction Act (PRA) in response to the broker rule proposed by the IRS.
The letter argues that finalizing the rule which will result in the submission of over 8 billion forms is contrary to the PRA.
Blockchain Association Criticizes IRS Broker Rule
THE Blockchain Association argues that the proposed broker rule places an undue burden on brokers. Marisa Tashman Coppel, an official with the association, noted that the PRA aims to protect the public from regulatory obligations related to the acquisition of information by federal agencies.
The PRA requires agencies to minimize public burden to the extent possible, which the proposed rule fails to achieve.
The association notes that the IRS’s assumption of 30 minutes per form would amount to four billion hours of work and add nearly a third to the overall paperwork burden imposed by the U.S. federal government. This calculation therefore shows that the IRS underestimated the time and costs needed for brokers to comply with the rule.
Financial implications of the proposed rule
The IRS has estimated the cost to complete each form at $63.53 per hour. Therefore, if 4 billion hours were required, the total cost would be over $254 billion. Therefore, this amount is much higher than the potential tax revenue, even if all global cryptocurrency-related revenue is taxed at the highest rate, creating a gap of approximately $10 billion.
The Blockchain Association notes that it is unreasonable to spend $254 billion to close a $10 billion gap. Marisa Tashman Coppel notes that the proposed rule and the associated Form 1099-DA are insufficient to meet the PRA’s requirements. As a result, the IRS significantly underestimated the time and financial constraints placed on brokers in the process.
At the same time, the IRS had recently released an early version of the new tax form called Form 1099-DA, used to report cryptocurrency transactions. According to the IRS, this form is designed to improve tax compliance for brokers and clients dealing in virtual assets.
Variant Fund CLO and Digital Camera CEO offer insights
Jake Chervinsky, the Chief Legal Officer of Variant Fund, has hinted at the possibility of legal action against the IRS regarding this tax issue. Chervinsky is particularly critical of the IRS’s use of financial surveillance to enforce tax laws based on the agency’s failure to recognize the potential of technologies that support P2P transactions.
Perianne Boring, CEO of the Digital Chamber of Commerce, also provided valuable input on the latest draft of the IRS Form 1099-DA.
Boring, however, sided with the IRS, explaining that the IRS initiative is to extend the regulatory scope to unhosted wallets, and also consolidates KYC rules for cryptocurrency sales and trade using brokers. This, she believes, is in line with the IRS’ continued push for compliance and disclosure in the cryptocurrency industry.
Read also: Digital Camera CEO Shares Vital Information About the IRS Crypto Tax Form 1099-DA