Coinbase’s Tax Chief Challenges IRS on New Crypto Tax Proposals!

• Coinbase’s VP of Tax, Lawrence Zlatkin, urges a revision of IRS’s crypto tax guidelines.
• The new guidelines could lead to an “unprecedented tracking of Americans,” Zlatkin warns.
• Senators are pushing for swifter implementation, but Coinbase emphasizes user privacy and parity with traditional finance.

As the IRS navigates the intricate world of crypto taxation, Coinbase’s Tax VP highlights concerns over the proposed tax rules, drawing attention to issues of user privacy and unequal treatment compared to traditional financial sectors.

Zlatkin’s Open Letter to the IRS

On Thursday, the public was made privy to a letter from Lawrence Zlatkin, Coinbase’s Vice President of Tax. In this communication, Zlatkin openly criticized the IRS’s newly proposed crypto tax guidelines. His primary concern revolves around the invasive nature of these rules, which, according to him, might lead to an “unchecked and unlimited tracking of Americans’ daily lives.”

Unpacking the IRS’s New Tax Proposals

The recent tax guidelines, introduced by the Biden Administration in August, spanned an extensive 300 pages. A significant section was dedicated to elucidating the term “broker” within the crypto realm. The proposal mandates crypto brokers, including exchanges and payment processors, to report user transactions to the IRS in the upcoming two years. Furthermore, it touches upon the responsibilities of DeFi platforms and miners in terms of user data collection. Despite Zlatkin’s reservations, several US senators are pressing for a swift application of these rules, foreseeing potential revenue loss if delayed beyond the proposed 2026 effective date for transactions occurring in 2025.

Coinbase’s Stance: Privacy and Parity

Lawrence Zlatkin’s letter offers a sharp critique of the IRS’s approach. He believes that the guidelines, as currently structured, would encroach upon Americans’ private decisions, citing examples from health care choices to mundane coffee purchases. The crypto exchange, currently in a tussle with the SEC, is advocating for a tax framework akin to that in the traditional finance world. Coinbase emphasizes the need for adequate time to establish intricate compliance systems and also suggests exploring blockchain-based solutions for tax reporting.

Zlatkin’s Six Key Concerns

Summarizing his arguments, Zlatkin points out six central issues he identifies in the IRS’s proposal:

• Disparity with traditional financial services.
• Overlapping and overly demanding reporting.
• Potential infringements on personal privacy.
• Contravention of technological neutrality.
• An impractical timeline for compliance.
• The bypassing of an opportunity to employ blockchain for ensuring taxpayer adherence.

Conclusion

The dialogue between crypto entities and regulators continues to intensify, with Coinbase’s open letter marking the latest chapter in this evolving narrative. As the IRS attempts to balance revenue generation with fair governance, the crypto community, represented by voices like Zlatkin’s, seeks clarity, fairness, and respect for user privacy. The unfolding of these discussions will significantly shape the crypto taxation landscape in the coming years.