A senior Coinbase tax executive testified before U.S. senators that the Internal Revenue Service lacks adequate infrastructure to process extensive cryptocurrency tax reporting required under current and proposed regulations. Lawrence Zlatkin, Coinbase's Vice President of Tax, warned during the Senate Finance Committee hearing that "the IRS is likely unprepared to handle the volume of data that even a single exchange like Coinbase will submit," emphasizing the need for practical administrability given billions of democratized crypto transactions.
Key unresolved taxation issues include potential exemptions for minor transactions (de minimis rule) and deferred taxation on staking rewards until sale. Senator Mike Crapo highlighted that current tax codes fail to provide clear guidance for various digital asset activities including purchases, investments, and staking, creating uncertainty for taxpayers.
While some lawmakers expressed concerns about crypto tax avoidance, industry representatives advocated for simplified reporting, including de minimis exemptions and special treatment for stablecoins. Recent IRS guidance provided temporary relief for companies like MicroStrategy and MARA regarding corporate minimum tax on unrealized Bitcoin gains, though these measures remain preliminary.