IRS rules could create 8 billion tax forms annually.
Compliance could cost $254 billion versus IRS estimates of $136.35 million.
Crypto industry sees rules as unrealistic and excessive.
The Blockchain Association has raised concerns over the IRS’s proposed broker rule, emphasizing the significant administrative and financial burden it could place on the cryptocurrency sector. They argue that the requirements are overly demanding and not aligned with the realities of digital finance management.
The advocacy group also points to the Paperwork Reduction Act, emphasizing that the proposed requirements go far beyond reasonable measures.
Concerns Over Compliance Costs
According to the Blockchain Association, the IRS’s new rule could generate an overwhelming 8 billion 1099-DA tax forms annually. The labor required to process these forms is estimated at 4 billion hours, with compliance costs potentially reaching $254 billion yearly.
Such figures starkly contrast with the IRS’s initial estimates, which suggested the regulations would require only 0.15 hours per customer, at a total cost of around $136.35 million.
The Association believes these requirements are disproportionate to the tax gap they aim to address, which stands at approximately $10 billion. Their contention highlights a mismatch between the perceived risks and the operational strain imposed on stakeholders within the crypto market.
8 billion forms and 4 billion hours of burdensome work costing $254 billion. That's what the IRS's proposed broker rule would result in.Today, we filed a comment letter arguing the proposed rule violates the Paperwork Reduction Act. https://t.co/Zm04wy86EZ
— Blockchain Association (@BlockchainAssn) June 21, 2024
Industry Backlash
The proposed rules have not been very well received in the crypto community and there are several reasons for that. Some people think that the IRS has some major misconceptions regarding the cryptocurrencies and the decentralised finance. This has culminated to what many regard as unrealistic and excessive rules which may hinder flexibility in activities within the blockchain subsector.
The executive director at Coin Center, Jerry Brito has explained that these requirements are almost impossible to implement especially within the decentralized platforms. The implementation problems together with the high costs of compliance have cast doubts on the viability of these measures.
Moreover, this isn’t the first time the Blockchain Association has taken a stand against IRS regulations. The group submitted a detailed 39-page document last year, outlining various objections to the IRS’s approach, reinforcing the industry’s stance against what it views as regulatory overreach.
These ongoing objections by major industry players underscore the tension between regulatory bodies and the rapidly evolving blockchain sector.
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