The Internal Revenue Service's to-do list is pretty packed right now. It just announced that it is implementing paperless tax protocols next year.
But a group of U.S. senators say it needs to make fighting crypto tax evasion a priority.
They are concerned about the Treasury Department's and IRS' apparent procrastination in complying with the Infrastructure Investment and Jobs Act's (IIJA) mandate of new tax regulations for crypto asset traders.
The IIJA-ordered rules would require third parties, such as Coinbase, to report information about individuals' crypto trades, including gains and losses, to the IRS.
Supporters of the expanded reporting say it would give the IRS necessary tools close the Tax Gap, the size of which many say is due in large part to uncollected crypto taxes.
Time slipping away: The IIJA became law on Nov. 15, 2021. It's crypto provisions set a Dec. 31, 2023, deadline for issuing the crypto tax regulations.
Those dates were alluded to in the senators' Aug. 1 letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel.
"Nearly two years have passed since the law was enacted, and the implementation deadline is less than six months away – but Treasury has yet to publish proposed rules," wrote U.S. Senate signatories Elizabeth Warren (D-Massachusetts), Bernie Sanders (I-Vermont), Bob Casey (D-Pennsylvania), and Richard Blumenthal (D-Connecticut).
"Without quick action, your agencies are at risk of failing to meet their congressionally mandated deadlines for implementation of a final rule," they added.
Possible lost money, too: Since money is always a great motivator in Washington, D.C., the senators also cited Joint Committee on Taxation (JCT) estimates that without the required IIJA rules, the Treasury could miss out on $1.5 billion in tax revenue in 2024 alone.
The possible lost revenue, according to JCT calculations, could reach almost $28 billion over the next 8 years.
To emphasize the fiscal cost, the letter also pointed to research by Barclays last year that estimated that crypto investors likely are paying less than half the tax they owe.
Some analyses put the lost tax revenue at around $50 billion a year, representing 10 percent of all unpaid taxes in the United States.
Act now to end crypto tax evasion: "Given the chance, tax evaders and the crypto intermediaries willing to aid them will continue to game the system, exploit loopholes, and siphon off billions of dollars a year from the U.S. government. You must not give them that chance," concludes the senators' letter.
The senators asked that Yellen and Werfel reply to their letter's concerns no later than Aug. 15.
Tax Felon Friday: This latest exhibit of congressional concern about crypto crime and the need to control crypto transactions and collect taxes earns this post a spot in the ol' blog's new end-of-week feature Tax Felon Friday.
You can read more tax crime posts, including those that were published long before I gave them a special designation, in the, what else, tax crimes category.
You'll find this post at the top of that category right now, so just scroll down for more.
You also might find these items of interest:
- Crypto regulation effort moving in Senate
- Congress pushes for crypto reporting regs to close Tax Gap
- IRS criminal investigators ramp up crypto tax evasion cases
- EU to crack down on crypto tax evasion with new transaction sharing rule
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