Crypto and the USA: All About the Tax Reporting Bill

by ImmuneBytes
Crypto tax USA

A lot is going on right now in the US Congress with regard to crypto. Cryptocurrency lobbyists were caught ill-equipped in one of the first legislative battles for their nascent industry.

The US Senate on 10 Aug approved the colossal $1.2 trillion infrastructure investment plan backed by President Joe Biden, a huge win for the Democratic president. Okay, but where does crypto fit into the infrastructure bill?

Continue reading to know the answer to this question! In this article, we’re talking all about what’s making headlines right now in the crypto world!

What does Crypto have to do with the Infrastructure Bill? 

One way lawmakers propose to pay for the $1 trillion infrastructure bill, which the Senate approved, is by imposing tax-reporting requirements for cryptocurrency brokers, the way stockbrokers report their customers’ sales to the IRS. This could open the way for tighter regulation of cryptocurrency — something the Biden administration is moving towards.

It is estimated that the plan could raise about $28 billion in revenue over 10 years, which would effectively pay for roads, bridges, water systems, internet broadband access, and shoring up the electrical grid. 

How Would this Impact Investors?

A new Amendment from Senator Mark Warner and Krysten Sinema was updated to exclude proof-of-stake validators as well as proof-of-work cryptocurrency miners from the crypto tax reporting provision. Warner noted to reporters that this was likely the final list of exemptions, which leaves software developers and decentralized platforms exposed to the new statute, should it pass.

The IRS defines cryptocurrency as “property” similar to stocks or gold. That means you pay capital gains tax when you sell it or cash it in at a profit. Which sounds harsh! Let’s see how this impacts the investors.

  • The rule, if implemented, may require cryptocurrency brokers to report traders’ information — including purchase and sales prices, transfers between brokers, and transactions of more than $10,000 — to the IRS. 
  • It can be difficult to calculate their profit or loss
  • There’s no real reporting or tracking mechanism, and it’s up to tax professionals to do a lot of subjective analysis,
  • Moreover, day-to-day activity may be taxable.
    For example, let’s say someone owns $50,000 worth of appreciated bitcoin and visits an ATM to withdraw $200. Converting that $200 from bitcoin to cash may be a taxable transaction, Pierre said. 
  • The new proposal may require cryptocurrency brokers to report purchase and sales prices, making it easier for the IRS to track profits, resulting in higher tax bills for some investors.

The impacts may not sound much but when implemented can be quite severe for crypto investors. The bill surely aimed at tightening the regulations surrounding cryptocurrencies.

The Decision

The package described by the White House as “historic” only needed a simple majority to pass, and received the rare backing of several Republicans. 

However, in the end, the crypto industry’s lobbying, public outreach, and even tweeted prayers weren’t enough. The last-minute amendment required unanimous consent on Monday — which meant support of all 100 senators — and when Alabama Republican Richard Shelby objected, the fight was lost, at least for now.

Crypto advocates worry that without adjustment, this provision will stifle crypto innovation in the U.S. and push business overseas since it would potentially cause confusion and set up reporting expectations that are unable to be fulfilled.

Final Thoughts

Crypto advocates say that the Senate defeat shows the need for more organizations and money as the burgeoning industry increasingly catches policymakers’ attention. Some lawmakers see cryptocurrency as a font of technological innovation, especially in the development of blockchain. 

Thus, this doesn’t mark the end of it all. With the indefinite potential and trajectory of growth, crypto still has a long way to go. 

About Us 

ImmuneBytes is facilitating blockchain security by employing the use of cutting-edge techniques on smart contracts and decentralized applications. We have a team of experienced security professionals who are adept at their niches and provide you with innovative solutions and consultation. So far we have worked on 175+ blockchain start-ups on different blockchain frameworks, with clients spread across the globe, and are continually unfolding ourselves to make this decentralized movement thrive.

 

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