Senators Ask IRS for Update on Crypto Tax Rules
Commentary by Jason Schwartz
Senators Warren (D-MA), Casey (D-PA), Blumenthal (D-CT) and Sanders (I-VT) warned Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel that they were "at risk of failing to meet their congressionally-mandated deadlines for implementation of a final rule to prevent crypto tax evasion."
In their letter, the Senators urged Treasury and the IRS to "act swiftly" to propose and finalize rules mandated under the Infrastructure Investment and Jobs Act ("IIJA"), which is aimed at addressing tax evasion within the cryptocurrency ecosystem and providing additional tools for taxpayers to more easily report taxable crypto income. The Senators stated that it would be an "unacceptable outcome" if Treasury and IRS fail to implement the new crypto tax reporting rules as required by December 31, 2023. Further, the Senators raised concern that the U.S. risked losing $1.5 billion in tax revenue in 2024 if the mandated rules were not implemented. The Senators requested information on:
- when Treasury intends to issue proposed regulations under IIJA and the time period Treasury will allow for public comment;
- the amount of tax revenue Treasury estimates it will risk losing during the 2024 calendar year in the event that it fails to implement the regulations before the deadline; and
- whether Treasury and/or the IRS will provide a briefing to the Senators on the proposed rules once they are published and then again once they are finalized.
The Senators asked for a response from Treasury and IRS by August 15, 2023.
Commentary
Senator Warren has irked the digital assets community with campaign slogans that include “I am building an anti-crypto army,” but many in the digital assets community share her frustration on the IRS’s delay in providing guidance that might make it easier for them to calculate their taxes.
While there is reason for frustration, the IRS is in an awkward spot. Digital assets still lack a non-tax legislative or regulatory framework, and tax rules often take their cue from non-tax rules. Even the definitions of “broker” and “digital assets” in the legislation directing the IRS to make rules on crypto broker reporting are hopelessly broad, leaving a lot of discretion to the IRS without giving the agency meaningful directions.