The U.S. Department of The Treasury filed an official report proposing tax compliance measures for U.S. registered businesses to report transfers worth over $10,000 to the Internal Revenue Service.
The report was part of the American Families Plan, an initiative put forward by the Biden administration. The proposal follows news of federal agencies investigating crypto and blockchain firms for possible money laundering and tax evasion offenses.
“Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.” the report stated.
The proposed requirement is a parallel measure in terms of previous requirements set by the state department for transfers of over $10,000. The proposal is set for businesses including banks, payment platforms, and cryptocurrency exchanges, encouraging these entities to report detailed information on both inflows and outflows from accounts on an annual basis, with the implementation beginning in 2023.
“Financial institutions house a lot of valuable information, and indeed already provide third-party reports to the IRS,” said the report. “Leveraging this information — rather than introducing new requirements for taxpayers — is a proven way to improve compliance.”
The U.S. Internal Revenue Service (IRS) currently does not have a system in place for independent verifications of transactions relating to cryptocurrencies, hence opening a potential for widening tax gaps.
“Despite constituting a relatively small portion of business income today, cryptocurrency transactions are likely to rise in importance in the next decade, especially in the presence of a broad-based financial account reporting regime,” the U.S. department wrote.
According to an October 2020 report filed by the IRS, only 83.6% of taxes were paid voluntarily and on time, on a data set that ranges between 2011 and 2013. Such a statistic describes a widening discrepancy between provisional amounts of taxes collected and the actual sum owed to the state, hence the projection of some $7 trillion in unpaid taxes over the coming decade. The proposal aims to lessen this potential gap by at least 10%.
The department claims that once the proposal is implemented, the U.S. government would be able to audit companies with discrepancies in tax with further efficiency, promising incentives to compliant companies should all transactions be reported with accuracy.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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