Crypto Tax: Consensys Requests Two Critical Modifications to IRS

Metamask developer Consensys has made a formal request to extend the deadline for the implementation of the IRS broker reporting rules, as per a tweet from the company’s lawyer, Bill Hughes. Hughes revealed on Monday that Consensys had submitted a letter to the U.S. Department of the Treasury and the Internal Revenue Service (IRS), requesting two critical modifications to the proposed regulations.

Metamask Developer Consensys Requests IRS

Firstly, Consensys cited the complexity of the proposed regulations and the necessity for a thorough analysis of their potential impact on the software applications provided by the company. Consequently, they requested an extension of the deadline for submitting comments until at least December 31, 2023 to allow for more comprehensive feedback and assessment of the proposed rules.

Secondly, the firm raised concerns about the feasibility of the proposed implementation deadline, which was set for January 1, 2025. They argued that complying with the regulations would pose substantial technical challenges, not only for Consensys but also for similarly situated companies. Therefore, they urged the IRS to postpone the implementation of the regulations for at least one year after their finalization.

These requests come in response to the IRS’s proposed regulations for tax reporting of cryptocurrency, non-fungible tokens (NFTs), and other digital assets, which were unveiled in August 2023.

These requests are in response to the IRS’s proposed regulations for tax reporting of cryptocurrency, non-fungible tokens (NFTs), and other digital assets, which the IRS unveiled in August 2023. Under the proposed regulations, brokers would be required to report cryptocurrency transactions using Form 1099-DA, similar to financial institutions reporting traditional investments such as stocks and bonds.

Notably, the IRS had initially scheduled the reporting rule to commence in 2024 but decided to delay it in December 2022. Nevertheless, this reporting is now expected to begin in January 2026 for transactions that occurred in 2025. The said regulations will encompass both centralized and some decentralized exchanges, crypto payment processors, and specific online wallets.

New Crypto Tax Guidelines in United States

That said, while the proposed rules aim to close the tax gap through accurate reporting and taxation of crypto transactions, experts have previously raised concerns over solely relying on Form 1099-DA, advocating a “trust, but verify” approach, particularly for off-chain transactions. Luckily, the Treasury and IRS remain open to public input as they work towards finalizing these regulations, which could give chance to more crypto friendly changes.