IRS releases draft of proposed reporting rules for digital asset brokers

House Financial Service Committee Chair Patrick McHenry said the rules are part of “the Biden Administration’s ongoing attack on the digital asset ecosystem.”

The Internal Revenue Service (IRS), the agency responsible for tax collection in the United States, released proposed regulations on the sale and exchange of digital assets by brokers. Under the rules, brokers would be required to use a new form to report to simplify tax filing and cut down on tax cheating.

The proposed Form 1099-DA would “help taxpayers determine if they owe taxes, and […] avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns,” according to a Treasury Department statement. It added:

Patrick McHenry, chairman of the House of Representatives Financial Services Committee, called the proposal “another front in the Biden Administration’s ongoing attack on the digital asset ecosystem.”

McHenry also called the proposed rules “misguided” and said, “Following the passage of the Infrastructure Investment and Jobs Act, numerous lawmakers of both parties made clear that any proposed rule must be narrow, tailored, and clear.”

McHenry added that he was glad that exemptions in the proposal reflected those in the Keep Innovation in America bill, which he co-wrote with Rep. Ritchie Torres. McHenry said the bill is intended to “fix the poorly constructed digital asset reporting provisions” in the IIJA.

Advocacy group Coin Center weighed in on digital asset taxation a few days earlier in a letter to Sens. Ron Wyden and Mike Crapo. The letter contained suggestions very specifically tailored to digital assets and raised privacy concerns.