Coinbase CEO Brian Armstrong has suggested US cryptocurrency businesses adopt broker-style bureaucracy to achieve a better relationship with the taxman.
1099-B ‘Potential Solution’ to Crypto Tax Woes
In a blog post published Saturday, Armstrong argued that the costliness of Coinbase’s current legal battle with the Internal Revenue Service could in future be avoided.
“…Coinbase and the IRS have (I believe) a shared goal to ensure all U.S. customers pay their taxes,” he wrote. “I believe a good option would be to use the same third-party reporting mechanism that brokerage firms like Fidelity and Charles Schwab use today: the 1099-B form.”
He said the court process in California, which is still dragging on, would “likely incur a legal cost of between $100,000 and $1,000,000 [USD].”
Form 1099-B is a tax filing document on which parties state yearly gains and losses, and Armstrong considers it a “potential solution” for resolving tax compliance issues for cryptocurrency holders.
Were such a form to be introduced as routine, all Coinbase customers for instance would be sent a form at the end of each tax year, which would then be filed by the exchange on their behalf.
“This would make it easy for users of virtual currency to pay their taxes without violating their privacy,” he said.
Best Of A Bad Bunch
While this arrangement may become burdensome for those wanting to use cryptocurrencies, alternatives appear lacking. The broadly-criticized John Doe summons served on Coinbase by the IRS would exact much more information from customers should it be upheld in court.
Nonetheless, there may still be problems.
“…I think the IRS guidance that treats virtual currency as property (instead of currency) may make this 1099 reporting inefficient (not just for us, but for the IRS and citizens),” Armstrong warned.
These same parties would, however, be in for a rougher ride should the court case not turn out in Coinbase’s favor. He concluded:
A protracted legal battle, seeking to reveal private information from people who are not evading taxes, would be bad for Coinbase, the IRS, and many U.S. citizens.
Meanwhile, a parody account of serial crypto investor Peter Thiel has suggested he be voted in for Governor of California in a move which would likely allow Coinbase and others to breathe a sigh of relief.
https://twitter.com/Thiel3X/status/820452275311112192
What do you think about Brian Armstrong’s idea? Let us know in the comments below!
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