Swimming in crypto forms

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Oct 30, 2023 View in browser   By Bernie Becker With help from Benjamin Guggenheim Driving the day WAIT, HOW MANY? The IRS is expecting so many information returns related to cryptocurrency — 8 billion, to be somewhat precise — that agency officials fully expect you to do a double take when you hear the actual number. “Don’t fall off your chairs,” Julie Foerster, the IRS’s director of digital assets, told attendees at a conference last week before dropping that number, via Jonathan Curry of Tax Notes. It is a difficult number to put in context: Foerster also said that the agency now expects twice as many information returns from virtual currency transactions as all other 1099 forms combined, a number she said could easily be too much for the IRS systems to bear. Seth Wilks, the vice president of government relations for the crypto accounting firm TaxBit, told Weekly Tax that he could see how the number of 1099-DA forms produced could add up quickly, given that each use of a virtual currency to buy a good or service, for instance, would spur a new information return. MORE ON THIS IN A BIT, but first thanks for joining us for an extra special Devil’s Night edition of Weekly Tax — where we’re also wondering what kind of medals they hand out at the “Florida Man Games.” Bringing continents together: Today marks an even half-century since the opening of the Bosphorus Bridge in Istanbul, which connected Europe and Asia and was, at the time of its completion, the longest suspension bridge outside of the U.S. Email: bbecker@politico.com, bfaler@politico.com, bguggenheim@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax. 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REGISTER HERE.     BACK TO CRYPTO: Let’s try to put some more context into all this: John Buhl of the Urban-Brookings Tax Policy Center said that there are around 40 million adults in the U.S. who make virtual currency transactions, which would mean that the IRS is expecting upwards to 200 information returns per user. Because of that, Buhl said he was surprised the IRS is expecting so many 1099-DA forms, the new return being created specifically for crypto, when new reporting requirements go into effect in 2026. But the 8 billion number might help explain why the IRS is moving more deliberately on implementing the crypto reporting requirements, which became law as part of the bipartisan 2021 infrastructure law, he added — and could also lead to more industry pressure to slow the rollout down even further. Still, Wilks has said that he was confident the IRS would have its systems ready to handle those billions upon billions of new information returns, if need be. But if it’s not 8 billion, is there a number of crypto-related information returns that might overload the IRS? Wilks declined to put a number on that, but he did say that the IRS should continue to work with the private sector to ensure it’s up to speed on emerging technologies. GOT AN EYE ON YOU: Let’s be honest — IRS commissioners have gotten tougher grillings from a GOP-led House Oversight Committee than Danny Werfel received last week. And that includes Werfel himself, who faced the ire of the very same panel a decade ago as interim IRS chief during the apex of agency’s tea party controversy. Which isn’t to say that House Republicans are about to go easy on the IRS, after making it a priority to claw back some of the $80 billion in extra funding that Democrats gave to the agency in their 2022 tax-and-climate bill. The latest example there: The House Judiciary Committee and the chamber’s select committee on weaponizing the federal government released a new report on Friday on the IRS, in which the panels took credit for the agency’s announcement this year that it would no longer spring unannounced field visits on taxpayers. That announcement came after the IRS came under criticism for, among other things, a visit to the house of the journalist Matt Taibbi on the same day that he testified before the weaponization subcommittee. For his part, Werfel has described the change in visit policy as a way to protect both employees and taxpayers — the latter from scammers, and the former from the hazards and risks that can come from dropping in on homes or businesses. In the report, House Republicans also previewed some other areas where they might keep the pressure on the IRS. Werfel, for instance, did receive some questioning last week about a case in which the IRS had to toss out penalties in a conservation easement case because agency employees fudged the dates on documents. GOP lawmakers “are already aware that the IRS is intentionally, and repeatedly, backdating tax documents to levy insurmountable penalties against taxpayers and businesses seeking to lawfully capitalize on available avenues for tax relief," the report said. SOME YEAR-END TIDBITS: The prospects for a year-end tax bill remain cloudy. But with just about two months left in 2023, advocacy groups who’d like to get a tax package across the finish line are ramping up their work. For instance, Business Roundtable, the advocacy group for corporate chief executives, has been hosting other trade associations and companies to coordinate lobbying efforts for a year-end tax bill, according to a source familiar with the operation. Business groups particularly are concerned about reversing three tax increases from the GOP’s 2017 tax law, which affect deductions for research and interest costs, as well as the writing off of investments. A year-end tax package could pair some relief from those tax increases with an expansion of the Child Tax Credit. Business Roundtable is also moving forward with a six-figure advocacy campaign that includes digital and radio advertisements that argue those three tax increases are putting American companies at a competitive disadvantage. Around the World Bloomberg: “Support For Japan’s Kishida Falls Even After He Orders Tax Cut.” Reuters: “Italy to raise taxes for flat owners doing multiple short-term rentals.” Also Reuters: “Canada to pause carbon tax on home heating oil for three years.” Around the Nation Nebraska Examiner: “Longtime state property tax administrator is leaving key post.” Oregon Public Broadcasting: “Portland metro area’s homeless tax could bring in nearly $1 billion in unexpected revenue by 2029.” Montana Public Radio: “Montana counties sue the state over property tax cap.” Also Worth Your Time From the Politico: “Federal prosecutor to Congress: I didn’t hinder Hunter Biden probe.” Pro Tax: “White House's Brainard calls for tax hikes on wealthy to cut deficit.” E&E News: “Senate Republicans look for cover in carbon tariff push.” Did you know? The longest suspension bridge in the world is in Turkey — the 1915 Çanakkale Bridge, which opened in 2022.   SUBSCRIBE TO CALIFORNIA CLIMATE: Climate change isn’t just about the weather. It's also about how we do business and create new policies, especially in California. So we have something cool for you: A brand-new California Climate newsletter. It's not just climate or science chat, it's your daily cheat sheet to understanding how the legislative landscape around climate change is shaking up industries across the Golden State. Subscribe now to California Climate to keep up with the changes.       Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Benjamin Guggenheim @ben_guggenheim   Follow us

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