IRS + DeFi A Match Made in Crypto Heaven – Why the IRS Should Offer a Free Tax Reporting Tool

The IRS Should Provide a Complimentary Tax Reporting Tool for DeFi Participants

Blockchain Technology: The IRS Needs a Turbo Tax for DeFi

Tax season is a dreaded time of year for many, but what if the Internal Revenue Service (IRS) could make the process as easy as using Turbo Tax? Well, that’s the direction the IRS is moving in with their Direct File pilot program. But why stop there? In the world of decentralized finance (DeFi), the IRS should harness the power of blockchain to provide taxpayers with free tax assistance.

Imagine this: You’re sailing through the DeFi seas, making gains and losses like a swashbuckling pirate. But when it comes time to report those gains to the IRS, it’s like walking the plank. That’s where blockchain comes in. By using open, traceable, and tamper-proof public blockchain data, the IRS can provide taxpayers with the information they need to navigate their DeFi taxes without the need for DeFi protocols to collect personal user data and file 1099 forms. It’s like giving every taxpayer their very own financial compass.

Now, I can hear the skeptics saying, “But how would this work?” Well, let’s break it down. The IRS proposal, released in 2023, defines brokers in the context of digital assets. It includes centralized exchanges, software developers, digital wallets, and even decentralized protocols. Sounds like a mixed bag, right? But here’s the rub: None of these parties directly effectuate transactions as defined by Congress. It’s like calling a parrot a pirate captain. It just doesn’t fly.

But wait, there’s more! The proposed rule creates a giant honeypot of personally identifiable information for hackers to plunder. We all know the IRS’s track record when it comes to data security. It’s about as secure as a paper boat in a thunderstorm. In fact, in 2016, the IRS admitted that over 700,000 social security numbers and sensitive personal data were stolen. It’s like the IRS is playing a game of hide and seek with your information, and they’re not very good at hiding.

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Now, let’s talk numbers. The anticipated volume of IRS-1099 forms to be processed is mind-boggling. We’re talking eight billion forms, people! That’s more than the total number of humans on Earth. It’s like the IRS wants to drown the world in paperwork.

But fear not, brave investors, because blockchain is the hero we need. With the transparency and traceability of public blockchain transactions, taxpayers can simply input their digital wallet addresses and receive a complete record of their taxable trades. It’s like having a personal tax assistant in your pocket. No more searching for buried treasure in a sea of paperwork.

So, why does the IRS insist on labeling an imaginary middleman and forcing them to report DeFi trades and tax information? There is no middleman in DeFi protocols. It’s like trying to fit a square peg into a round hole. Instead, let’s embrace the innovation of this new technology and focus regulation on true middlemen like Coinbase. They can handle filing tax information reports with the IRS, while taxpayers enjoy a smoother, more efficient tax season. It’s a win-win game.

Now, dear readers, let me leave you with a question: Are you ready to set sail on the blockchain seas and make tax season a breeze? And don’t worry, I’ll be right there with you, cracking jokes and unraveling the mysteries of the digital investment world. Fair winds and happy investing!

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