As published on ibtimes.com, Thursday 15 July, 2021.
President Biden and the Internal Revenue Service are set to crack down on people who are using cryptocurrency to avoid paying taxes.
Cryptocurrency has been used to avoid paying taxes by some in several different ways, including plan B passports, Yahoo! News reports. This allows users to acquire passports from seven different countries so they can avoid paying capital gains taxes on their assets. The fraudsters claim citizenship in countries like the Cayman Islands, where they pay little to no taxes and report their earnings, despite doing business in the U.S. This allows them to keep what they earn from their investments.
Now, with Biden needing the money for his ambitious agenda (including $4 trillion in infrastructure plans), he is cracking down on the fraud, CNBC reports.
The White House wants to give the IRS $80 billion to crack down on tax dodgers, in the hopes of bringing back trillions in losses from people not paying taxes. However, some may not have intended to avoid paying taxes, as the tax laws surrounding the crypto markets are still being worked out, and they aren’t reported the same way on tax forms.
“A lot of people overpay their income because they got confused,” Shehan Chandrasekera, a CPA at CoinTracker, told CNBC.
The IRS is still stepping up its plans to tax cryptos though, since starting to ask for reporting on them in 2019. The Biden administration’s new rules could be included in his 2022 budget proposal, which will detail reporting requirements for these earnings.
One proposal would require businesses to report all transactions worth $10,000 or more in cryptocurrency to the IRS.
In addition, the President also plans to raise the capital gains tax from 23.8% to 43.4%.
“Crypto gains are being taxed as any other type of gain in assets, either long-term capital gains or ordinary rates, President Biden has been proposed to eliminate the differences between those two,” said David Lesperance, a Toronto-based attorney. “This translates to a $19,800 in increased capital gains tax each $100,000 in capital appreciation of crypto.