The U.S. Treasury Department proposed Thursday that cryptocurrency transactions of more than $10,000 are required to report to the U.S. Internal Revenue Service (IRS).
In a proposal titled the “American Family Plan” released by the United States of President Joe Biden on Thursday, it suggested that the importance of cryptocurrencies will arise, even though crypto transactions only take a small portion of corporate income at this stage.
U.S. Treasury Department aims at strengthening regulatory management by requiring more information on the report of the inflow and outflow from accounts of over $10,000 for digital assets including banks, payment providers, and cryptocurrency exchanges annually, saying that:
“Businesses that receive cryptoassets with a fair market value of more than $10,000 would also be reported on. Although cryptocurrency is a small share of current business transactions, such comprehensive reporting is necessary to minimize the incentives and opportunity to shift income out of the new information reporting regime.”
To increase the transparency of total income and expenditures, Biden’s proposal requires that information records on financial accounts needed to be provided to the IRS, The new system will cover other accounts similar to financial institution accounts, foreign financial institutions, crypto-asset exchanges, and custodians.
The report stated that:
“Still another significant concern is virtual currencies, which have grown to $2 trillion in market capitalization. Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.”
This is one of the reasons why the White House proposed to provide more resources for the IRS to study the growth of crypto assets.
Additionally, Reuters reported that the Biden administration’s tax enforcement proposal will invest approximately $80 billion in U.S. tax agencies by 2031 and double the number of IRS employees to improve tax revenue compliance.
Government documents revealed that companies might circumvent bank account audits in cash. Therefore, the business tax gap will shift to cash-based transactions and may cause difficulties when verifying internal security risks. Tax regulators still need to explore a more reasonable path for the companies that currently handle cash and cryptocurrencies.