Crypto Industry Contributes to National Tax Gap, According to US Lawmakers
Two influential members of the United States Congress, Congressman Brad Sherman and Representative Stephen Lynch, have taken a stand against the current state of tax compliance within the cryptocurrency industry. In a letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, the lawmakers called for the implementation of comprehensive tax regulations to address the alarming national tax gap caused by the lack of clear guidelines for the crypto sector.
The #Cryptocurrency industry has been a major source of tax evasion & a significant part of the nation’s tax gap.
—Congressman Brad Sherman (@BradSherman) June 5, 2023
Highlighting their concerns, Sherman and Lynch emphasized that the The crypto industry has long been associated with tax evasioncontributing significantly to the country’s fiscal gap.
Lawmakers Demand Crypto Tax Regulations to Crack Tax Evasion
They referenced an audit report from the Treasury Inspector General for Tax Administration (TIGTA) in September 2020, which shed light on the IRS’s difficulties in identifying taxpayers involved in crypto transactions due to insufficient reporting mechanisms.
Additionally, lawmakers acknowledged that Congress had already passed the Infrastructure Investment and Jobs Act, which required cryptocurrency brokers to track and report their clients’ crypto transactions for IRS reporting purposes. However, final regulations regarding this requirement have yet to be issued., although the completion of the review process for proposed regulations by the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) in February.
However, Congressman Brad Sherman and Representative Stephen Lynch urged the Treasury Department and the IRS to quickly release the proposed regulations, emphasizing the need to close the tax gap and bring the cryptocurrency industry into full tax compliance.
As the cryptocurrency industry continues to evolve, the tax laws that govern it are still in their early stages. However, it is crucial that individuals and companies transacting crypto understand the tax implications and ensure accurate presentation on their tax returns.
Industry leaders, including renowned exchange Binance, have recognized this responsibility and have taken proactive steps to promote tax compliance. Binance recently released a tool called “Binance tax”, that helps users estimate their crypto tax liability for free, offering valuable information on potential tax charges in an easy-to-use manner.
In May, the Biden administration renewed its efforts to implement a 30% Digital Asset Mining Energy (DAME) tax for cryptocurrency miners, initially proposed in President Biden’s FY2024 budget announcement in March 2023. . However, the proposed mining tax was not included in subsequent legislation addressing the increase in the US debt ceiling. While seen as temporary by cryptocurrency advocates, concerns over the 30% mining tax have eased momentarily.