President Joe Biden is coming for crypto tax cheats, foreign and domestic.
Saying “tax evasion using crypto assets is a rapidly growing problem,” the administration wants to substantially expand the amount of data U.S. cryptocurrency brokers — including exchanges and hosted wallets — must report to the Internal Revenue Service.
In a Treasury Department document explaining the administration’s 2022 budget proposal, it explains that the all-digital nature of the industry and global nature of the cryptocurrency market makes it easy “for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers.”
It also means U.S. tax evaders can create offshore entities to conceal their identity, so the proposal would require crypto brokers who report on crypto assets to identify and report the “beneficial owners of entities holding accounts with the broker.”
However, using this information to catch U.S. tax evaders is only half the battle, the Treasury Department said.
Explaining that the U.S. “has established a broad network of information exchange relationships with foreign jurisdictions under information exchange agreements,” the agency said those agreements had been “central” to its recent success in catching tax evaders hiding traditional assets offshore.
But those information exchanges must be a two-way street, it said. And the IRS has found that the strength of those information exchange relationships “often depends on the United States’ willingness and ability to reciprocate by exchanging comparable information.”
Report at $600
Beyond that, the cryptocurrency industry would be included in a broader proposal to require financial institutions to report any transaction of $600 or more from a business or personal account.
This would mean collecting Taxpayer Identification Numbers (TINs) and filing a revised version of Form 1099-K would be expanded to include all payee accounts, subject to that $600 threshold. This would mean reporting both gross receipts and gross purchases, physical cash, transfers in and out, and payments to and from foreign accounts.”
These same reporting requirements would apply to cryptocurrency exchanges and custodians, as well the purchase of crypto assets by U.S. taxpayers.