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The Fight Against DeFi Tax Rules
The DeFi Education Fund has filed a lawsuit against the US IRS, just 24 hours after the agency released its controversial tax framework. The lawsuit claims that the new tax rules targeting DeFi protocol violate the Administrative Procedure Act (APA) and place an unnecessary burden on software developers.
According to the lawsuit, the public advised the US IRS not to move forward with the planned tax rules during the rule’s comment period, but the agency ignored these warnings. The suit argues that the rule "puts unlawful compliance burdens on software developers who build so-called ‘trading front-end services.’"
The DeFi Education Fund believes that these regulations will stifle innovation and burden American entrepreneurs if they stand. As part of the new tax rules, trading front-end service providers will be required to record transaction details of users, which they will then need to provide to the IRS on demand, with users advised to fill out Form 1099 for tax reporting purposes.
Controversial US IRS Regulations
The broader crypto industry has long criticized the US IRS for some of its demands. As reported earlier by Coingape, the regulator has declared that crypto staking is taxable upon receipt. The agency revealed this in a lawsuit filed against it by an industry insider, Joshua Jarrett.
In addition to these, the Digital Chamber has flagged some privacy concerns in some of the agency’s tax policies. Experts believe that the regulator is doing all it can to establish its ideologies before the new administration takes over.
Conclusion
The outcome of the lawsuit remains to be seen, with all eyes now on Treasury Sec nominee Scott Bessent on whether these rules will be repealed or not.
FAQs
Q: What is the DeFi Education Fund’s lawsuit against the US IRS about?
A: The DeFi Education Fund’s lawsuit against the US IRS is about the agency’s new tax rules targeting DeFi protocol, which the fund claims violate the Administrative Procedure Act (APA) and place an unnecessary burden on software developers.
Q: What is the purpose of the new tax rules?
A: The purpose of the new tax rules is to require trading front-end service providers to record transaction details of users and provide them to the IRS on demand, with users advised to fill out Form 1099 for tax reporting purposes.
Q: What are the concerns about the new tax rules?
A: The concerns about the new tax rules are that they will stifle innovation and burden American entrepreneurs, as well as raise privacy concerns due to the required recording and reporting of transaction details.
Q: What is the next step in the lawsuit?
A: The next step in the lawsuit is for the court to review the DeFi Education Fund’s claims and determine whether to hear the case.
