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But how do cryptocurrencies lead to tax evasion?
According to tax experts, it mainly results in loose reporting requirements.
If the exchange, company, or other third party does not report, the IRS may not be able to track cryptocurrency income or transactions. This means that your income may not be taxed.
“There are a lot of non-reports because no one has set clear rules for it,” he said. John Feldhammer, A partner of the law firm Baker Botts and a former IRS senior litigant.
“Whenever we make a way to not report, we create a way to profit from tax evasion in a way that is untraceable or much more difficult to track,” he said.
Cryptocurrencies are rapidly becoming an alternative to cash as more merchants accept Bitcoin and other cryptocurrencies as payments. However, cash is more tightly regulated.
For example, a company that receives more than $ 10,000 in cash from a customer must submit a currency transaction report. This can happen if a consumer buys a car for $ 10,000 or more in cash, someone makes a fortune at a casino, or a bank receives a large amount of cash deposits.
These reports tell the government that the buyer has a large amount of money that may or may not be reported on the tax return.
However, the same rules do not apply to cryptography. Used car businesses that receive $ 20,000 in Bitcoin from their customers do not need to submit a currency transaction report. If not listed on the employer’s tax return, the income could also be tax exempt, Feldhammer said.
A Treasury report said, “Despite making up a relatively small portion of corporate profits today, cryptocurrency trading could become more important in the next decade, with a particularly widespread financial account reporting system. If you do, that’s the case. “
In addition, cryptocurrencies do not have to be bought or sold through exchanges, making these transactions more opaque to government officials.
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According to the Treasury, about 80% of the US “tax gap” comes from underreported income, most of which occurs among the wealthy, who hide their income in an opaque structure.
He said stronger reporting standards, including “comprehensive reporting” of cryptocurrencies, are one of the most effective ways to improve tax compliance.
Mr. Biden’s tax agenda treats cryptocurrency transactions like cash, for businesses Report if you receive over $ 10,000 In virtual currency.
Financial institutions, payment settlement institutions, digital asset exchanges and custodians also need to report cryptocurrency transactions that exceed certain thresholds. analysis Proposal announced by law firm Greenberg Traurig.
The IRS is already keenly interested in learning about taxpayers’ cryptocurrency activities. Ask about holding cryptocurrencies It is listed on page 1 of the 2020 tax return.
Mr Biden’s compliance agenda must be passed by Congress. According to the Treasury, the overall plan will raise $ 700 billion in the first 10 years and another $ 1.6 trillion in the next 10 years.
The White House will use these funds to pay for American family planning measures.The proposal Including Two years of free universal preschool education, two years of free community colleges, large grants for middle-class families, federal paid family leave, and additional funding to increase child tax deductions.
Cryptocurrencies pose a great risk of tax evasion
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