CONGRESS MIGHT TAX CRYPTO CURRENCY
June 28, 2021 - Douglas Myser
Congress might tax crypto currency. With exploding budget deficits and a need to raise revenue due to the need of the government to spend even more to bail the country out of the Covid health crisis, finding alternate paths to additional revenue are suddenly extra appealing to a Congress that knows that deficits are never popular with the public to begin with. With a President who has promised to pay as you go, yet having an agenda that borders on the Great Deal of Roosevelt, and costing even more, suddenly the latest rise of the Crypto currency market, could be its undoing, or at least its temporary setback, if Congress and the President decide its time to tax Crypto. Congress might tax crypto currency.
In tax year 2019, the gap between taxes paid and taxes owed to the Government was an estimated $584 billion, according to the Treasury Department. That's lower than IRS Commissioner Charles Rettig's estimate that there could be a $1 trillion annual tax gap. Under reporting and non-reporting on cryptocurrency gains play a role in that tax gap. The IRS applies capital gains tax rules to cryptocurrency just like it would with stocks. But the IRS needs to know about sales, profits and losses before it can assess any tax. The tax collection agency has been going to court to make cryptocurrency exchanges supply information on certain customers who might be less than candid about their cryptocurrency holdings.
In another sign of the Federal Government's increasing focus on cryptocurrency, the Treasury Department said it wants to require businesses to report large cryptocurrency transactions to the Treasury Department. The tougher tax enforcement would come about in two ways, more funding to rebuild the ranks of the IRS, and more information reporting to the IRS so the tax agency has a better understanding of where money is coming and going. One of the real tests of the crypto markets will be when Congress finally pulls the trigger and decides to tax the market. How far down will the market go, and how many investors, hiding assets will then pull out completely ?