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The United States government is increasing compliance enforcement around cryptocurrency. Coming soon, if you are transacting $10,000 or more worth of crypto at a time via exchanges or banking services, the IRS will want to know about it.
The United States Treasury department released a report on Thursday that outlined the Biden administration’s tax compliance plan. The plan includes a new requirement for businesses to report cryptocurrency transfers of $10,000 and above to the IRS. The report says:
“As with cash transactions, businesses that receive cryptoassets with a fair-market value of more than $10,000 would also be reported on.”
The Biden administration’s proposed plan is designed to increase tax compliance for cryptocurrency trades, effectively punishing tax evaders and generate more revenue.
“[Cryptocurrency transactions] already poses a significant detection problem by facilitating illegal activity broadly including tax evasion,” the report reads.
Furthermore, the report acknowledges that the crypto market needs to be watched closely having already grown to a $2 trillion market cap in the past year. The government institution is not expecting the market to decrease either:
“Cryptocurrency transactions are likely to rise in importance in the next decade.”
The Treasury department acknowledges that the IRS is slow to catch up with modern technology and this leaves room for people to dodge paying taxes.
“This is because the IRS operates outdated systems and lacks the ability to fully take advantage of the benefits of more modern technology due to its resource constraints,” the report says.
While the idea of the additional regulatory oversight could be regarded as a threat, there is also another way to look at this development. The upside is that it will bring cryptocurrency reporting to the same level as current cash reporting of large transactions in the “traditional” business and markets. And while there is plenty to argue about when it comes to taxes, paying taxes on trading and income is not something new.