Global cryptocurrency investors active in the U.S. market or on the U.S. exchanges are going to have a tough time dealing with the regulators. In the latest development, the Joe Biden administration has proposed to collect data of foreign crypto investors active in the U.S. market.
The U.S. government is reportedly mulling a move for a broader crackdown on tax evaders and is looking for international cooperation. Last Friday, May 28, the Treasury Department released the “Greenbook” of revenue proposals. It demands that crypto brokers such as exchanges and other wallet service providers provide all details of foreign individuals indirectly holding accounts.
The Treasury noted that the proposal addresses “certain passive entities and their substantial foreign owners”. In exchange for the information they receive, the U.S. government is keen on working with foreign governments on providing information of individuals or entities that are dodging the tax liabilities of their respective countries. The Greenbook proposal reads:
“The global nature of the crypto market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers”.
The IRS Criminal Tax Division has already started working with its counterparts in other countries like Canada, Australia, the U.K, and the Netherlands.
This move comes as the Joe Biden administration is willing to bolster the tax administration. However, for the proposal to come into effect, this move would require Congressional legislation.
Reporting All Transactions Above $10,000
The Fiscal Year 2022 Revenue Proposal released by the Biden administration seeks to put a minimum threshold on crypto payments received. Thus, businesses receiving anything greater than $10,000 in crypto payments have to report the regulators and provider details of other businesses/individuals with whom they are transacting.
The IRS officials believe that cryptocurrencies are contributing to the growing tax gap, meaning the taxes owed and the ones actually paid on time. Citing the estimates provided by IRS Commissioner Charles Rettig, Bloomberg reports that this tax gap can be in excess of USD 1 trillion a year. The report further adds:
“Under the proposal, financial institutions would have to report gross account inflows and outflows with a breakdown for physical cash, transactions with a foreign account and transfers to and from another account with the same owner. The requirement would apply to all business and personal accounts except those below a US$600 threshold.”