Crypto surprise rattles industry in rare bipartisan tax plan
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A Senate proposal to ramp up IRS surveillance over cryptocurrency promises to generate $28 billion in tax revenue.
Cryptocurrency exchanges, investors and their advisers were caught off guard Wednesday when a bipartisan Senate infrastructure agreement was released that included a large-scale increase in the requirements for crypto brokers and investors to report their transactions to the Internal Revenue Service. The proposal is designed to help fund the $550 billion of investment into transportation and utility upgrades.
The proposal — which updates rules requiring brokers to report cryptocurrency transactions and for businesses investing in crypto to disclose trades of more than $10,000 — was the result of a compromise between the White House and Senator Rob Portman, a lead Republican negotiator.
The plan is said to address a key challenge for the federal government: keeping up with the explosion of cryptocurrencies, both in quantity and in value, allowing holders to circumvent the traditional banking system, and remain largely anonymous. The Crypto market’s value surpassed $2 trillion this year.
IRS Commissioner Chuck Rettig has said tax evasion from virtual currency is a key contributor to the growing tax gap. Cryptocurrency use has also been tied to illegal activity, including drug trafficking and money laundering.
Cryptocurrencies have evolved much more quickly than the government has been able to pass laws to regulate it. Which made additional tax enforcement in the area mutually agreeable, even after lawmakers decided to cut an earlier proposal in the infrastructure plan for a broader expansion of IRS audits.
The cryptocurrency industry, however, raised questions about whether the $28 billion revenue estimate — from Congress’s official tax scorekeeper, the Joint Committee on Taxation — was accurate.
Also, some firms within the crypto space, said it’s unclear whether they even have the ability to comply with the proposal and that if implemented, it could push part of the industry overseas.
Whether you’re looking to comply with current cryptocurrency regulations or want guidance regarding the tax implications on transactions of your other assets, we’re here to help. Feel free to contact us.