U.S. Treasury cracks down on crypto: transfers over $10K to be reported to IRS
(Kitco News) The U.S. Treasury Department announced that it would be taking steps to implement stricter cryptocurrencies compliance through IRS, adding that the crypto space poses a tax-evasion risk.
The crypto world is part of the Biden administration's proposal to reinforce tax compliance, with a new requirement to report any crypto transfer of at least $10,000 or more to the Internal Revenue Service (IRS), the Treasury Department said on Thursday.
"As with cash transactions, businesses that receive cryptoassets with a fair-market value of more than $10,000 would also be reported on," the Treasury Department said in a report on tax-enforcement proposals. "Within the context of the new financial account reporting regime, cryptocurrencies and cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies would be covered."
Tax evasion is a risk with cryptocurrencies, the department said. "Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly, including tax evasion. This is why the President's proposal includes additional resources for the IRS to address the growth of cryptoassets."
The proposed reporting is needed "to minimize the incentives and opportunity to shift income out of the new information reporting regime."
New crypto regulations are part of the department's overall report detailing the Biden administration's newly proposed measures to raise additional $700 billion through IRS enforcement.
The Treasury's new guidelines would also extend to crypto asset exchanges. "The annual return would report gross inflows and outflows on all business and personal accounts from financial institutions, including bank, loan and investment accounts," the report said. "The reporting regime would also cover foreign financial institutions and crypto asset exchanges and custodians."
The new ruled would come into effect in 2023. Last year, the IRS already added a line asking about cryptocurrency in Form 1040 of the individual tax returns.
The announcement comes a day after the crypto space saw a massive selloff across the board, which saw bitcoin nearing the January lows of $30,000. Since then, bitcoin managed to recover back above $40,000. But following the Treasury's statement, bitcoin retreated, last trading at $38,867.63, down 2.29% on the day.
At the beginning of May, Securities and Exchange Commission Chairman Gary Gensler said that there are some apparent gaps in the regulatory framework surrounding crypto assets.
"Our authority is around securities and around asset managers and products that might invest in these cryptocurrencies," Gensler said during his testimony before the House Financial Services Committee. "Right now, the exchanges trading in these crypto-assets do not have a regulatory framework either at the SEC or CFTC. There is no market regulator, and thus there is really no protection against fraud or manipulation.