On May 20, 2021, the U.S. Department of the Treasury announced a proposal that would require any cryptocurrency transaction of $10,000 or more to be reported to the Internal Review Service (“IRS”). As a supplement to President Biden’s American Families Plan, which focuses on investments in American children and families, the Treasury detailed the cryptocurrency reporting requirement and other tax compliance initiatives in a new report titled The American Families Plan Tax Compliance Agenda (the “Report”).
In the Report, the Treasury states that “[c]ryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion. . . . Despite constituting a relatively small portion of business income today, cryptocurrency transactions are likely to rise in importance in the next decade, especially in the presence of a broad-based financial account reporting regime.” The IRS also has identified cryptocurrency transactions as an enforcement priority and has recently included cryptocurrency reporting on the individual tax return, Form 1040.
Though the Report does not fully detail the cryptocurrency reporting requirements, it indicates that cryptocurrencies, cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies would be covered. It also states that, similar to cash transactions of the same amount, businesses that receive cryptoassets with a fair market value of more than $10,000 would be required to report this. Many of the proposals discussed in the Report, however, will require Congressional approval.
Read the Report.