President Biden is making some big moves to crack down on cryptocurrency tax evaders, as well as bring in more IRS regulations.
President Biden has unveiled his Fiscal Year 2022 Revenue Proposals. The main goal of the new proposal is to catch people that are evading taxes with cryptocurrency and add more Internal Revenue Service (IRS) oversight to cryptocurrency exchanges. Currently, cryptocurrency exchanges are required by law to collect your personal information and provide the IRS with a Form 1099-Ks report of your cryptocurrency activities if you hold more than $20,000 in gross volume and perform 200 or more transactions in a year.
However, that is the current rule. Biden's new plan aims at lowering the gross volume threshold down to $600 and allows for the IRS to have much more oversight over the exchanges. On top of that, the proposed guidance from Biden pushes for cryptocurrency exchanges to provide the IRS with more user activity information such as "gross purchases, physical cash, payments to and from foreign accounts, and transfer inflows and outflows", according to Forbes.
Lastly, if brought into law, the proposal from Biden would require a report for every cryptocurrency transaction exceeding $10,000. This new law would require, for example, a car dealership to write up a report that includes your personal identification number and the amount the business has received if the car you purchased was above $10,000. The very same principle applies to cryptocurrency exchanges when a user moves an asset worth more than $10,000 - the IRS would require a report.
Biden suggests in his proposal that cryptocurrency can be used to evade tax quite easily due to it being digital and have the capabilities of being traded quickly, stored, and hidden in offshore exchanges. As a result of that, the United States has begun to create information exchange relationships between foreign countries to eliminate the people who are evading tax, regardless of where they live.
If everything in Biden's proposal is adopted into law, this new system will be implemented after December 31, 2022.