Key Takeaways
- They argue it’s unreasonable to spend $254 billion to close a $10 billion tax gap.
- They argue that enacting these rules would overwhelm the system with 8 billion 1099-DA tax forms.
The Blockchain Association has voiced strong opposition against the new tax rules proposed by the Internal Revenue Service (IRS), claiming that the rules violate the Paperwork Reduction Act, which aims to reduce the burden of government paperwork on the public.
The crypto advocacy group has argued that the IRS’s new “broker-dealer” rules are expensive and complex to implement.
In a recent letter, the Association paints a bleak picture if these rules take effect. They estimate the rules would generate 8 billion new tax forms, require 4 billion hours to process, and cost $254 billion annually to comply with.
The letter further argues that enacting these rules would overwhelm the system with 8 billion 1099-DA tax forms, demanding 4 billion hours of labor and imposing a $254 billion annual compliance cost.
These figures starkly contrast the IRS’s earlier estimates, which projected the new regulations would take only 0.15 hours per customer to complete, totaling $136,350,000 in compliance costs. The Blockchain Association claims the real burdens are far greater.
The Association also highlights a significant disparity between the compliance costs and the potential tax revenue. They argue it’s unreasonable to spend $254 billion to close a $10 billion tax gap. The IRS estimated the cost to complete each form at $63.53 per hour. Therefore, 4 billion hours of labor would amount to over $254 billion, vastly exceeding the potential tax revenue.
Marisa Tashman Coppel, a spokesperson for the Blockchain Association, emphasized that the proposed rule and the associated Form 1099-DA do not meet the Paperwork Reduction Act’s requirements. “The IRS has greatly underestimated the time and money constraints placed on brokers,” she said.
Apart from Blockchain Association, other leading crypto advocacy groups have also come out strongly against IRS’s new reforms.
The Digital Chamber of Commerce has argued that IRS’s proposed Form 1099-DA, requests unnecessary information. It also raised concerns about the form’s request for private sensitive information including transaction IDs and digital asset addresses.
The group claimed that this could potentially infringe on taxpayers’ privacy and should only be collected if there is suspicion of criminal activity.
