Under Section 6045 (REG-122793-19) the IRS expands the definition of "intermediary" "beyond the critical point" in the digital asset reporting rules, officials said. In public hearings.
The IRS uses a "very broad definition of an intermediary" to include "those who carry out or can carry out a transaction without people, such as by providing an automated marketing system, and by providing services to identify the most competitive opportunities." "Buy and sell prices by offering unattended wallets allow users to access trading platforms that provide services that enable access to the Internet, including browsers and ISPs," Lawrence Zlatkin, Coinbase's vice president of taxation, said Monday. "To include people in this broad category of activity stretches the meaning of the law to its limits."
Zlatkin also said the proposed rules would place a heavy burden on the IRS, citing the agency's director of digital assets, which said the service would receive $8 billion in Form 1099-DA alone, as it wanted to report total income. Selling and exchanging digital assets; Another IRS official said Tuesday that figure is an estimate of how much the agency may collect, but "the IRS cannot predict exact amounts at this time."
The IRS initially estimated the rules would affect between 13 million and 16 million digital asset owners, and admitted that number could be lower at that point, including 9,500 intermediaries.
Thirteen speakers, including Zlatkin, shared their concerns with IRS and Treasury Department officials during a 90-minute telephone hearing. Additionally, the proposed rules received nearly 125,000 comments, including nearly 45,000 comments posted on Rules.gov.
In the preamble to the proposed regulations published in the Federal Register in August, the IRS and Treasury explained that they were working to expand the Title II reporting rules. Law 6045 covers intermediaries who act as agents, managers or brokers of digital assets to sell digital assets to others. The rules cover the sale or exchange of digital goods for cash, brokerage services and goods that may be reported by brokers. The proposed legislation also expands the reporting rules to include intermediaries that make payments on behalf of customers for digital assets related to payment cards and transactions on third-party networks that must be reported under Sec. 6050 watts.
The proposed regulations clarify that the definition of intermediary for purposes of section 6045 includes digital asset trading platforms, digital asset payment processors, certain digital wallet hosting providers, and persons who provide ransoms for digital assets created or issued by such person.
The proposed regulations were issued in response to amendments to Section 6045 of the Infrastructure Investments and Jobs Act, PL 117-58, signed into law in November 2021.
Speakers raised privacy concerns that the proposed rule's broad definition of intermediary could mean that too many people could receive too much personal information from you.
Intermediaries would have to collect, store and report a user's cryptocurrency wallet address to the government, "allowing both the intelligence collector and the government to track that person's entire transaction history, regardless of whether other transactions on that date are required to be reported." said Jenna Moon, General Counsel of OpenSea. "The definition of a digital asset intermediary is broad enough to include multiple entities as intermediaries because of their direct or indirect involvement, so taxpayers will be required to share sensitive PII [personally identifiable information] with multiple entities for the same transaction." An NFT is the equivalent of wanting to sell a concert poster on Craigslist, but you must list your name, home address, Social Security number, and full Venmo history with Craigslist, Venmo, and the IRS.
Moon and others argue that some NFTs should be exempt if they are collectible and not used as financial instruments.
Narrowing the NFT definition contained in the proposed regulations and excluding indirect service providers from the definition of a digital asset intermediary "will allow taxpayers and the IRS to obtain the information they need to comply with and enforce tax laws" without creating unnecessary security and privacy concerns. . Moon said: Risks. .
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