Why the Crypto Industry Is So Upset About the IRS’ Proposed New Tax Reporting Rules - Ep. 575

11.28.2023 - By Laura Shin Play

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The IRS sparked a storm of controversy when it released proposed new rules for crypto transaction reporting earlier this year. The new rules seek to define who is considered a broker, what types of transactions need to get reported, and the kinds of digital assets that need to be included, but many in the industry consider them overly broad and ultimately unworkable.

Lawrence Zlatkin, VP of Tax at Coinbase, and Shehan Chandrasekera, Head of Tax Strategy at tax software firm CoinTracker, discuss the crypto industry’s specific objections to the proposed new rules, and what might be a better way forward. They also delve into how the regulations would apply to stablecoins and NFTs, potential blockchain-based solutions for the reporting requirements, and what the likely outlook and timeline for the proposals to come into effect are.

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Show highlights:

What the newly proposed IRS regulations around crypto are and when they are likely to go into effect

what entities qualify as a broker and why this may pose a problem

what the implications for the industry are if these regulations were passed

the number of additional reports the IRS is expecting to receive if these regulations are adopted

how the regulations would apply to stablecoins and NFTs

what the five types of brokers are under the proposed regulations and the three types that they exclude, according to Shehan

the unprecedented amount of comments submitted

what suggestions Coinbase and CoinTracker have in mind for better tax regulation

why Lawrence thinks that DeFi exchanges should be treated the same as centralized ones

whether people should have privacy concerns about the new proposals

what some blockchain-based solutions for tax reporting are, such as attestation tokens

what the next steps for the IRS proposed regulation are

how long it will take to actually implement these regulations

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Guests:

Shehan Chandrasekera, Head of Tax Strategy at CoinTracker

Lawrence Zlatkin, VP of Tax at Coinbase

Links

Previous coverage of Unchained on crypto taxes, with appearances from Shehan and Lawrence:

Everything You Need to Know About Filing Your 2022 Crypto Taxes

Your 2021 Crypto Taxes: How to Handle NFTs, DAOs, Airdrops and More

Everything You Need to Know About Your 2020 Crypto Taxes

Why You Shouldn’t Trust Crypto Exchange Reports for Your Taxes

The IRS Is Cracking Down on Crypto Taxes: What You Need to Know

Could the Bank Secrecy Act Harm Crypto? Coin Center Thinks So

Infrastructure Investment and Jobs Act (117th Congress)

Proposed rule:

IRS proposed rule text: Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions

U.S. Department of the Treasury, IRS Release Proposed Regulations on Sales and Exchanges of Digital Assets by Brokers

CoinDesk: How the Crypto Industry Responded to the IRS Proposed Broker Rule

Twitter thread from Ji Kim of Crypto Council for Innovation

CNBC: President Joe Biden to sign the bipartisan infrastructure bill⁠ into law—here's how crypto investors will be impacted