The report, which describes President Joe Biden’s proposed tax compliance initiative, says the IRS systems are not up to speed with how the latest modern technology operates.
Noncompliance will only be exacerbated by the more sophisticated attempts at tax evasion, the report says, noting that those opportunities have especially become available for higher-income individuals, who could use strategies like offshoring, making complex partner structures and moving taxable assets through the crypto economy.
Biden is reportedly looking into how to change things and make things into a “more equitable” tax regime, with a series of proposals looking to boost resources for pursuing noncompliant taxpayers, leverage information to use against those misreporting income “derived from opaque categories,” improving the outdated IRS tech and regulating paid tax preparers and increasing penalties for those who commit malfeasance on purpose.
The report notes that virtual currencies have boosted by $2 million in market capitalization, and says crypto has already been used in the past to facilitate illicit activity via tax evasion.
That said, Biden’s initiative will be adding resources for the IRS to address crypto, which the report posits will become more of a presence in the economy — especially as a broader financial account reporting begins to happen. And as with cash assets, those businesses receiving crypto assets of over $10,000 would be reported on.
Cryptocurrency is currently just a small share of business transactions, though the report says comprehensive reporting is necessary to help avoid fraud or people trying to go out of the “new regime” of finance reporting.
The China Banking Association, a nonprofit self-regulating association of financial services firms, has issued a directive for the industry to cease participating in business with virtual currencies as of May 19. That includes not using crypto for pricing products and services, underwrite insurance businesses, or include crypto in the scope of insurance liability.
That comes as bitcoin recently hit a value of $32,000, around a 50 percent fall from its height in mid-April.