Bitcoin News Today: IRS Rules Complicate Bitcoin Payments; Industry Pushes for Exemption

Jack Dorsey, founder of Block (formerly Square), has advocated for a federal tax exemption on small Bitcoin transactions to facilitate the cryptocurrency's use as a practical medium of exchange. The proposal aligns with efforts by U.S. Senator Cynthia Lummis (R-WY) to introduce legislative changes that would exclude low-value crypto transactions from capital gains reporting. Dorsey's call follows the launch of fee-free Bitcoin payment services by Block for small businesses using its Square point-of-sale systems, emphasizing the need to reduce regulatory burdens for everyday users Dorsey, Lummis Push for Bitcoin Tax Relief as Block Expands BTC Payments^[1].

Lummis has previously attempted to advance similar provisions but faced setbacks in July when time constraints prevented the inclusion of crypto tax reforms in President Trump's reconciliation bill. Now, she is advancing Senate Bill 2207, which proposes a $300 exemption threshold per transaction, with an annual cap of $5,000. The bill aims to alleviate the administrative challenges posed by the IRS's current classification of cryptocurrency as property, which necessitates capital gains reporting for every transaction Square Integrates Bitcoin Payments as Dorsey Urges Tax Relief on Small BTC Transactions^[2].

Under existing IRS rules, even minor Bitcoin transactions-such as purchasing coffee-trigger taxable events, creating significant compliance hurdles for merchants and consumers. This framework, which treats digital assets differently from traditional currencies, has been criticized for impeding Bitcoin's adoption as a daily payment tool. Dorsey's advocacy for a de minimis exemption reflects industry calls to harmonize crypto taxation with that of fiat currencies, which are not subject to similar reporting requirements Dorsey, Lummis Push for Bitcoin Tax Relief as Block Expands BTC Payments^[1].

The proposed exemption has drawn support from industry leaders, who argue it would enhance Bitcoin's practicality as a payment method. However, experts caution that the reform must be part of a broader legislative package addressing broker reporting rules and fiat conversion mechanisms to effectively promote adoption. Lummis has urged supporters to contact their representatives to advance the legislation, emphasizing its potential to bolster U.S. competitiveness in the digital asset space Square Integrates Bitcoin Payments as Dorsey Urges Tax Relief on Small BTC Transactions^[2].