The $1.2 trillion in infrastructure deal reached by the two parties in the Senate used cryptocurrency transactions as a new source of taxation to help pay for these costs, which has raised alarms in the unregulated fintech industry.
The bill was finalized on Sunday and will raise approximately $28 billion in funds by requiring cryptocurrency brokers and investors to report transactions to the U.S. government. Internal Revenue Service.
It will implement similar rules for transactions involving Bitcoin and more than 8,600 forms of cryptocurrency currently applicable to the sale of stocks and securities.
The Congressional Taxation Committee stated that the $28 billion will come from identifying transactions that avoid income tax. According to supporters of the plan, reporting requirements alone are enough to scare tax evaders into paying taxes.
The Treasury Department wants to implement reporting requirements for transactions worth more than $10,000, the same as the reporting threshold for cash and other commercial transactions.
Still a new one Internal Revenue Service The reporting rules are also a supervision of the arbitrary cryptocurrency market.
The Blockchain Association, an advocacy organization in the cryptocurrency industry, believes that the new Internal Revenue Service Reporting rules will undermine the development of the US currency market.
The association stated that the definition of a broker in the proposal is too broad and may include software developers and others involved in cryptocurrency transactions. Kristen Smith, executive director of the Blockchain Association, said that this may remove companies that are critical to the development of cryptocurrencies from the U.S. business.
“Unfortunately, this happens when legislation progresses too quickly,” she said.
As infrastructure advances in the Senate, the association is trying to amend the regulations. But the association is not entirely opposed to the reporting requirements, Ms. Smith said.
She and other cryptocurrency advocates argue that those who owe taxes related to cryptocurrency transactions usually don’t know that they have received a tax bill that is due.
Ms. Smith said that as cryptocurrencies have gained a foothold in recent years — and became popular during the coronavirus pandemic — the rules governing the fintech industry have not kept up, creating uncertainty about what investors should do.
Unlike stock investments, cryptocurrency companies will not send customers a 1099-B form stating how much money they have made and how much tax they owe.
“They didn’t get 1099-B, so they didn’t expect it,” Ms. Smith said.
It is unclear whether Internal Revenue Service Will enable cryptocurrency brokers to send such forms.
Ron Wyden, the chairman of the Senate Finance Committee and a Democrat from Oregon, said that cryptocurrencies are mature and deserve the same tax treatment as other financial sectors.
“In 2011, a Bitcoin didn’t buy you a ham sandwich. Today’s cryptocurrency creates huge new opportunities for tax fraudsters to blackmail the American people,” he said at a recent tax hearing.
This Internal Revenue Service It is estimated that 441 billion U.S. dollars in taxes are not paid on time each year, which means that approximately 83.6% of taxes are paid on time. However, this figure does not include unpaid cryptocurrency taxes or taxes from foreign or illegal sources.
Internal Revenue Service Commissioner Charles Rettig told Mr. Wyden’s committee that he did not give a figure on how many unpaid taxes related to cryptocurrencies, which the agency called a tax gap.
But he said that if these and other unaccounted forms of unpaid taxes are taken into account, “it’s not surprising that the tax gap is close to or may exceed US$1 trillion per year.”