Senators Rob Portman and Mark Warner proposed an amendment on Thursday to the crypto tax reporting rule that was tabled days earlier by the senate infrastructural bill’s cryptocurrency provision.
The new amendment states briefly that the proposed reporting requirements exclude proof-of-work mining as well as the sale of software and hardware that support hot and cold cryptocurrency wallets’ functionality.
“Validating distributed ledger transactions through proof of work (mining) or selling hardware of software the sole function of which is to permit persons to control a private key (used for accessing digital assets on a distributed ledger.”
The Senate’s $1 trillion bipartisan Infrastructure bill that calls for increased cryptocurrency tax reporting was declared on August 3 and aims at boosting revenue collection from the budding cryptocurrency industry.
Bill Could Increase Revenue Collection by $28 Billion
The Joint Committee on Taxation said that the enforcement of the bill could bring approximately $28 billion in collected revenue in the next ten years. It would also primarily affect companies and investors in the broker category in the cryptocurrency market.
The bill may require the brokers to provide the IRS with trader information regarding transfers between brokers, purchase and sale prices, and transactions worth over $10,000. This would allow the IRS to easily track profits and could result in higher tax bills for many investors in the market.
Leaders in the cryptocurrency market started to push back on the bill right away, including the Chamber of Digital Commerce which termed the bill as too broad and vague.
The bill allegedly leaves much room for other businesses outside of the primary target group of brokers to be defined under this category and therefore has the potential to hurt other companies in the digital currency sector.
“Further clarifications are needed to ensure the digital asset ecosystem can continue to grow and flourish in the U.S.”
According to CoinCenter’s Jerry Brito, the amendment is still insufficient in many ways and does not address key issues such as software development.
“Senator Warner and Portman are proposing a last-minute amendment competing with the Wyden-Lummis-Toomey amendment. It is disastrous. It only excludes proof-of-work mining. And it does nothing for software devs. Ridiculous.”
Brito further added that the passing of the bill will only bring more confusion and stifle the fair development of the crypto market in the US.
“If this passes, this is the U.S Congress picking winners and losers.”
Crypto Market Investors With Significant Portfolios Should Seek Help Early
The current reporting method only requires investors to disclose their virtual currency activity and often leaves investors at a loss of just how much information is required by the IRS. This is according to certified public accountant and owner of Texas-based Pierre Accounting, Eric Pierre.
“I think a lot of people just want to do the right thing. They don’t want the IRS on their back but they just don’t understand how it’s supposed to be reported.”
While the bill doesn’t come to effect in 2021 if passed into law, Pierre advised crypto brokers with significant holdings to start working early with tax professionals.
“If you have significant holdings, you should do some planning before the year-end, so you’re not hit with a surprise tax bill.”
