Two influential members of the United States Congress, Congressman Brad Sherman, and Rep. Stephen Lynch, have taken a stand against the current state of tax compliance within the cryptocurrency industry. In a letter addressed to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, the lawmakers called for the implementation of comprehensive tax regulations to address the alarming national tax gap caused by the lack of clear guidelines for the crypto sector.
The #Cryptocurrency industry has been a major source of tax evasion & a significant part of the nation's tax gap.
Today I, along with @RepStephenLynch, urged @USTreasury & #IRS to release proposed regulations that would bring the cryptocurrency industry into full tax compliance. pic.twitter.com/VgTlAzrOE4
— Congressman Brad Sherman (@BradSherman) June 5, 2023
Highlighting their concerns, Sherman and Lynch emphasized that the crypto industry has long been associated with tax evasion, significantly contributing to the country’s tax gap.
Lawmakers Demand Crypto Tax Regulations to Address Tax Evasion
They referred to an audit report by the Treasury Inspector General for Tax Administration (TIGTA) in September 2020, which shed light on the IRS’ struggles in identifying taxpayers involved in crypto transactions due to insufficient reporting mechanisms.
Furthermore, the lawmakers acknowledged that Congress had already passed the Infrastructure Investment and Jobs Act, requiring cryptocurrency brokers to track and report their customers’ crypto transactions for IRS reporting purposes. However, the final regulations regarding this requirement have yet to be issued, despite the completion of the proposed regulations review process by the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) in February.
Congressman Brad Sherman and Rep. Stephen Lynch, however, urged the Treasury Department and IRS to promptly release the proposed regulations, emphasizing the need to close the tax gap and bring the cryptocurrency industry into full tax compliance.
Industry Efforts
As the cryptocurrency industry continues to evolve, the tax laws governing it are still in their nascent stages. However, it is crucial for individuals and businesses engaged in crypto transactions to understand the tax implications and ensure accurate reporting on their tax returns.
Industry leaders, including the renowned Binance exchange, have recognized this responsibility and taken proactive measures to promote tax compliance. Binance recently launched a tool called “Binance tax,” which assists users in estimating their crypto tax liability for free, offering valuable insights into potential tax burdens in a user-friendly manner.
In May, the Biden administration renewed its efforts to implement a 30% Digital Asset Mining Energy (DAME) tax on crypto miners, initially proposed in President Biden’s FY2024 budget announcement in March 2023. However, the proposed mining tax did not make it into the subsequent legislation addressing the increase in the U.S. debt ceiling. While crypto advocates perceive this as temporary, the 30% mining tax concerns were momentarily alleviated.
