- In a letter, dated Aug. 2, the Senators fervently request the establishment of stringent cryptocurrency tax reporting laws.
- On July 31, the IRS released a Revenue Ruling to elucidate the taxation procedure for income derived from crypto staking.
Senator Elizabeth Warren, alongside three of her fellow U.S. Senators, has voiced her concern to the Internal Revenue Service (IRS) regarding the necessity of tightening tax reporting regulations for entities dealing in cryptocurrencies, referred to as ‘crypto brokers.’ Their collective anxiety stems from an anticipated $1.5 billion tax revenue shortfall in the fiscal year 2024 due to existing regulatory deficiencies.
A Call for Stricter Oversight on ‘Crypto Brokers’
Anti-cryptocurrency advocate Elizabeth Warren, together with Senators Bob Casey, Richard Blumenthal, and Bernie Sanders, has drafted a letter addressed to Daniel Werfel, the Commissioner of the IRS. In this letter, dated Aug. 2, the Senators fervently request the establishment of stringent cryptocurrency tax reporting laws.
The Push for New Regulations
The group’s initiative follows the passing of the Infrastructure Investment and Jobs Act (IIJA) in November 2021, which incorporated guidelines necessitating third-party “crypto brokers” to disclose details pertaining to sales, earnings, and losses to the IRS. The definition of “crypto brokers” was ambiguously broad, encompassing entities like validators, nodes, wallet providers, miners, and stakers.
Despite these provisions, the Senators are dissatisfied, stating:
Nearly two years have passed since the law was enacted, and the implementation deadline is less than six months away – but Treasury has yet to publish proposed rules.
Adding further urgency, they warn:
Without quick action, your agencies are at risk of failing to meet their congressionally-mandated deadlines for implementation of a final rule.
They also invoke an estimate by the Joint Committee on Taxation, which alerts the IRS to a potential loss of approximately $1.5 billion in tax revenue for the fiscal year 2024.
Warren and her co-signatories have expressed strong disapproval of tax evaders within the crypto sector:
Given the chance, tax evaders and the crypto intermediaries willing to aid them will continue to game the system, exploit loopholes, and siphon off billions of dollars a year from the U.S. government.
These politicians are pressing for prompt publication of the new rules before the looming Dec. 31, 2023 deadline, with an expectation for a response to their letter by Aug.15.
Recent IRS Guidelines on Cryptocurrency
On July 31, the IRS released a Revenue Ruling to elucidate the taxation procedure for income derived from crypto staking.
The ruling explained that U.S. crypto investors are required to report staking rewards as gross income in the fiscal year they are obtained.
Further, the “fair market value” of these rewards must be incorporated into annual income, with valuation determined at the moment the rewards are received.
“The fair market value is determined as of the date and time the taxpayer gains dominion and control over the validation rewards,” the IRS articulated.
In summation, this call to action by Senator Warren and her colleagues underscores the growing concern over the management of crypto-related financial activities, specifically in regard to tax reporting. The proposed changes aim to seal potential loopholes and safeguard the government’s revenue stream. The resolution of this matter is being keenly watched by both the crypto industry and regulators alike.
