IRS Commissioner says Accurate Crypto Reporting Would Help In Closing the ‘Tax Gap’
Charles Rettig suggests legislation requiring transactions in cryptos to be reported the same as securities transactions.
The Internal Revenue Service (IRS) Commissioner Charles Rettig says the US government is losing $1 trillion in unpaid taxes every year and that accurate reporting from crypto users can help close the “tax gap.”
This tax gap, the difference between legally owned and revenue collected, has grown substantially since the last official estimate of a $441 billion annual average from 2011 to 2013, Rettig told the Senate Finance Committee.
He said since then, new sources of wealth have arisen, such as crypto trading that is escaping taxation.
“If you add those in, I think it would not be outlandish, that the actual tax gap could approach, and possibly exceed $1 trillion” on an annual basis, Rettig said.
The agency, he said, is “outgunned” by increasingly sophisticated tax avoidance schemes, while budget cuts have left them with about 17k fewer staff than a decade ago and asked for “consistent, timely, adequate and multiyear funding.”
President Joe Biden’s fiscal 2022 budget request would boost the IRS budget by 10.4%, about $1.3 billion from current levels.
The tax gap, which the Treasury has made a priority to close, represents underreported income, exaggeration of claimed tax breaks, and underpayment or nonpayment of taxes owed.
For this, Rettig suggested legislation requiring transactions in cryptos to be reported the same as securities transactions are on 1099 forms. These reports would help the IRS to tax gains in the $2.172 trillion crypto market.
About a month ago, a study from the IRS’s own National Research Program looked into tax evasion and found that while under-reporting at the bottom of the income ladder rose 7%, it surged 21% for top one-percent earners, reported Market Watch.