“I think we need congressional authority,” the IRS head, Charles Rettig, said on Tuesday in testimony to the Senate Finance Committee. He argued that his service gets “challenged frequently” in the field of cryptocurrency operations and having a “clear dictate from Congress” allowing it to collect the relevant information “is critical.”
Most cryptocurrencies are “designed to stay off the radar screen, so we will be challenged right now,” Rettig said, adding that cryptocurrency market capitalization has since grown to over $2 trillion as it includes more than 8,600 exchanges worldwide.
The administration of US President Joe Biden has previously suggested obliging cryptocurrency brokers, including exchanges, to report information on their clients, including foreign investors.
The Treasury Department’s proposed budget for next year includes $32 million for crypto-related enforcement operations. It also includes a measure that would require businesses to report all crypto assets that they receive that are worth more than $10,000.
Rettig, however, argues that the Biden administration proposals can only be the beginning of the campaign to increase oversight over cryptocurrency deals. “We need additional tools, and we absolutely need additional resources,” he said.
The IRS announced its “Operation Hidden Treasure” – a probe aimed at uncovering unreported crypto-related income and fighting cryptocurrency fraud – back in March and started investigating potential cryptocurrency-related tax evasion cases in May.
It requested information on large transactions that could be subject to US taxes from crypto exchanges through court summonses. Yet, according to Rettig, it faced lawsuits alleging that the agency’s actions violate the Constitution’s Fourth Amendment prohibiting unlawful search and seizure.
The Congress apparently is more than willing to help the IRS with its woes. Senator Rob Portman (R-Ohio) said that Congress would like to work with the tax agency and grant it such authority.
The US Treasury also said last month it plans to raise $700 billion over the next decade through new tax enforcement measures, including enhanced cryptocurrency reporting requirements, since it expects cryptocurrency to “rise in importance” in the near future.
The US government is not the only one that plans to cash in on cryptocurrency taxes. The Australian Tax Office requires local crypto traders to report their gains, as it says the nation’s capital-gains tax (CGT) applies to cryptocurrency.
Canada taxes selling crypto for fiat money, trading cryptocurrency or using it to pay for goods and services as well as even gifting it to someone. Ottawa sees it as either a capital gain or income, depending on whether the activity involving crypto is considered a business or not.
Her Majesty’s Revenue and Customs in the UK says that an individual who holds crypto assets as a personal investment has to pay a capital gains tax on overall gains from it above the annual exempt level. The UK taxes crypto received from mining, airdrop, and confirmation rewards as well as in salary from an employer.
On the other hand, capital losses from crypto can be deducted to reduce overall taxable capital gains in the UK.
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