Crypto exchanges and similar venues would have to report new data surrounding the sale and exchange of digital assets by its users to the Internal Revenue Service (IRS) should newly proposed legislation pass into law.

The US Treasury Department said the newly proposed rules were conceived as a means to “crack down on tax cheats” and noted that it would also serve the purpose of helping law-abiding taxpayers know how much they owe on the sale or exchange of digital assets.

The proposed regulations come as part of a broader effort to “close the tax gap”, address the tax evasion risks posed by digital assets, and help ensure that “everyone plays by the same set of rules”, the treasury added.

Highlighting its belief the newly proposed regulations would align tax reporting on digital assets with tax reporting on other assets, and thereby avoid “preferential treatment” between different asset types, the treasury proposal pointed out that while under current law taxpayers owe tax on gains and may be entitled to deduct losses on digital assets when sold, for many taxpayers it is difficult and costly to calculate their gains.

These proposed rules require brokers to provide a new Form 1099-DA to help people determine if they owe taxes and would help taxpayers avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns, it said.

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