Biden Administration Proposing Collecting Data on Foreign Crypto Investors
This has been proposed as part of a global data sharing pitch that will help the US receive information from foreign governments on US individuals who are not reporting their crypto transactions and are dodging their US tax liabilities.
The Biden administration is proposing collecting data on foreign cryptocurrency investors active in the US to bolster international cooperation to help in a broader crackdown on tax evasion.
Last Friday, the Treasury Department released its new tax regime in which it proposed a requirement for cryptocurrency brokers such as exchanges and wallet providers to provide information to the IRS on foreign individuals indirectly holding accounts with them.
The proposal addresses “certain passive entities and their substantial foreign owners,” the Treasury said.
Probably seen as a blind spot for foreign owners, the US could then provide the collected information to foreign governments and, in exchange, receive information on US individuals dodging their tax liabilities.
The latest emphasis on taxation is part of President Joe Biden’s administration’s campaign, which will basically help pay for trillions of dollars of their proposed spending programs.
As we reported, Internal Revenue Service Commissioner Charles Rettig has estimated the difference between taxes owed and actually paid on time to exceed $1 trillion a year. And according to officials, crypto is a significant contributor to this growing tax gap.
There may also be a cybersecurity element as White House Press Secretary Jen Psaki called for expanding the analysis of cryptocurrencies as one of the steps to help curb cyber attacks.
The IRS’s Criminal Investigation division has already been working with agencies in countries like Canada, Australia, the U.K., and the Netherlands to pursue global tax cheats, including those using cryptocurrency. The Greenbook proposal said,
“The global nature of the crypto market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers.”
The Treasury was already working on proposed regulations under existing law before the year started. As per them, cryptocurrency brokers are required to report certain information, including customer identity and gross proceeds from sales, to the IRS.
The Biden administration is proposing that all the new reporting requirements go into effect in 2023.