IRS Urges Congress To Enforce Stricter Crypto Compliance, Addresses Tax Evasion
The U.S Internal Revenue Service (IRS) is bent on taking steps to crack down on cryptocurrency markets and transactions as it called out lawmakers to address tax evasion.
IRS Wants $32M in Funding To Pursue Tax Evasion
The IRS also requires funding to the tune of $32 million to pursue cryptocurrency tax evasion.
The $32.3 million the tax agency is seeking forms part of a much larger budget request of $13.2 billion for the 2022 fiscal year as outlined in the Congressional Budget Justification & Annual Performance Report and Plan.
According to the report, the funding would be used to employ specialized contractors to boost the IRS’s internal efforts. Firms that can assist the tax regulator in its enforcement of crypto-based tax evasion would be hired with the funds.
While speaking at the senate hearing on the IRS’ fiscal year 2022 budget, IRS Chief Charles Rettig said the agency needs a clear mandate from Congress to regulate crypto.
He added that the agency needs to collect information on cryptocurrency transfers valued at over $10,000 that largely go unreported.
“The authority for us to collect that information is critical. The most recent market cap in that world — in the crypto world — exceeded $2 trillion and more than 8,600 exchanges worldwide, and by design, most crypto virtual currencies are designed to stay off the radar screen, so we will be challenged.”
The administration included several new crypto reporting requirements in a recently outlined revenue proposal.
One of which is that cryptocurrency transfers of $10,000 or more would now be reported to the IRS just like banks report cash transfers of that amount and brokers to report securities transactions to the IRS. The proposed change would start in 2023.
US’s Growing Interest In Crypto Taxation
The US’s interest in cryptocurrency transactions is growing. Last month, the US Treasury Department released a statement disclosing that the government is looking at proposing more severe penalties for those who evade their tax obligations.
According to the Treasury’s estimates, the difference between taxes owed to the US government and those paid totaled nearly $600 billion in 2019.
This wave of increased regulation is upsetting cryptocurrency investors who do not agree with the new tax payments rules.
Joshua Jarrett, a cryptocurrency investor, filed a suit against the IRS, claiming that taxing newly created tokens as income contradicts the US tax law.
According to Jarrett, cryptocurrency tokens can be income and then taxed when they’re received as payment or compensation, but newly-created tokens are not supposed to be taxed until they are sold.