U.S. Treasury Calls for Financial Institutions to Share Account Information for Taxation

U.S. Treasury Calls for Financial Institutions to Share Account Information for Taxation

The Treasury Department on Thursday announced that it is taking steps to crack down on cryptocurrency markets and transactions, and said it will require any transfer worth $10,000 or more to be reported to the Internal Revenue Service, and seeks to leverage information financial institutions already have on customers.

The treasury department said in a release, “The Government Accountability Office (GAO) and IRS agree that strengthening third-party reporting is one of the most effective ways to improve tax compliance. The President’s proposal leverages the information that financial institutions already know about the accounts that they house. Financial institutions would add information about total account outflows and inflows to existing reporting on bank accounts. Importantly, there are no added requirements for taxpayers. The IRS will be able to deploy this new information to better target enforcement activities, increasing scrutiny of wealthy evaders and decreasing the likelihood that fully compliant taxpayers will be subject to costly audits. As a result, voluntary compliance will rise through deterrence as would-be tax evaders realize that the IRS has an additional lens into previously unreported income streams.”

The Treasury document said that crypto reporting is one part of “the President’s tax compliance initiatives that seek to close the ‘tax gap’—the difference between taxes owed to the government and actually paid.” The proposal calls for a $4.5 billion investment in IT to implement a new information-reporting regime that would help close that gap, which was nearly $600 billion in 2019.

US law already “requires that trades and businesses report cash payments of more than $10,000 to the federal government,” per the IRS website. This information “assists law enforcement in its anti-money laundering efforts” and “provide[s] authorities with an audit trail to investigate possible tax evasion, drug dealing, terrorist financing and other criminal activities,” the IRS says.

 

SEC chair would like more crypto exchange regulation

There are also calls for new regulations on cryptocurrency exchanges to prevent investors from getting ripped off. Securities and Exchange Commission Chairman Gary Gensler said yesterday that “he would like to see more regulation around cryptocurrency exchanges, including those that solely trade bitcoin and do not currently have to register with his agency,” Reuters reported.

“This is a quite volatile, one might say highly volatile, asset class, and the investing public would benefit from more investor protection on the crypto exchanges,” Gensler said at the Financial Industry Regulatory Authority’s annual conference.

Earlier this month, Gensler told a House committee that, “right now, these exchanges do not have a regulatory framework at the SEC or at our sister agency, the Commodity Futures Trading Commission. Right now, there’s not a market regulator around these crypto exchanges and thus there’s really no protection around fraud or manipulation.” Gensler’s comments appeared in a Coindesk article.

CNBC article yesterday said that “[i]ncreased regulation will likely upset some cryptocurrency investors, who have seen the value of bitcoin slide about 25 percent over the past month and talk of capitulation creep into online forums.” However, CNBC quoted policy analyst Ed Mills as saying that “regulation would add further legitimacy to the asset class and could provide a regulatory moat around existing cryptocurrency exchanges.”

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