IRS to Begin Taxing Cryptocurrency Transactions Over $10,000

The United States Treasury has called on the IRS to impose rigorous cryptocurrency compliance measures, citing significant tax evasion risk in the industry.

According to a new order by the Treasury Department, all transactions over $10,000 have to get filed with the IRS for documentation and taxation objectives. This announcement comes after the cryptocurrency market suffered a massive plunge that saw Bitcoin fall to the $30k level.

The IRS will get allocated an $80 billion package to help it tackle and enforce this new rule. That said, cryptocurrency traders and investors will come under intense scrutiny, given that cryptocurrency transactions are harder to trace and tax than other investment options.

The Treasury Department asserts that this new effort will generate about $700 billion within the next ten years. The Department argued that lax enforcement of tax rules in the crypto space benefits wealthier tax evaders, given that they possess sophisticated tools to hide and launder money. The new regulation should come into effect in 2023 once approved.

Difficulty in Taxing Cryptocurrency Transactions Calls for a More Stringent Approach

To source capital to fund his aggressive infrastructure projects in the US, President Joe Biden continues to seek out ways to effectively maximize government revenue potentials. One such approach is to double down on taxing capital gains, which would generate massive amounts of revenue from wealthy investors, including newly-minted crypto millionaires.

Compared to other financial markets, the crypto industry is hard to monitor and tax. This difficulty comes from several factors, including poor KYC requirement enforcement by top exchanges, massive on-chain trading volume, and the ease of laundering money through services like Tornado, Cash, and Swirl.

Reports show that while crypto wallets and transactions on the blockchain may not be directly linked to a real account because of the clustered mechanism of transactions and use of pseudonyms, all that is required is one point of failure (something like a centralized exchange) to successfully identify ‘anonymous’ users.

 

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