Biden Tax Plan targets cryptocurrency compliance to fund IRS
TAX ALERT |
Authored by RSM US LLP
On May 20, 2021, the Treasury released The American Families Plan Tax Compliance Agenda (Compliance Agenda), which outlines proposed ways to increase compliance measures that will help close the “tax gap” and, consequently, will help to fund the President’s plan to rebuild the IRS, which is estimated to cost over $80 billion over the next 10 years. The Compliance Agenda comes on the heels of a flurry of proposed plans released within the last two months including The Made in America Tax Plan, Overhauling International Tax Framework and The Made in America Tax Plan Report. For more information on these proposals, refer to our recently published articles, Biden tax plan: International tax implications, Biden Unveils his American Families Plan and President Biden signs American Rescue Plan Act of 2021.
The IRS views cryptocurrency compliance as a priority and they have included the reporting of this information on an individual tax return (refer to IRS issues digital asset updates to staff manual and draft form 1040). This comes as no surprise to those watching this space as the IRS has warned of stricter crypto asset enforcement since November of 2018 (refer to IRS Commissioner warns of stricter crypto enforcement).
The Compliance Agenda notes that cryptocurrency will be subject to increased information reporting. According to Compliance Agenda, “Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.” The Compliance Agenda anticipates a significant increase in digital asset use over the next 10 years and the proposed compliance plan would include cryptocurrencies, crypto asset accepting payment service accounts and cryptoasset exchange accounts. Additionally, businesses receiving any crypto assets with a fair market value over $10,000 will now have to report these assets. Thus bringing the reporting of digital assets in line with cash transactions. The Compliance Agenda focuses on third-party information reports as compliance rates substantially increase when the IRS can verify the information via these reports.
Businesses engaged in the digital asset industry should expect to see additional regulations and reporting requirements in the coming years. As additional guidance is formalized, it is imperative that taxpayers and those with information reporting requirements stay informed on their obligations; especially the effective dates as missed reporting requirements can be costly to remediate. Digital asset businesses with potential exposure should consult with their tax advisors.
Call us at (800) 624-2400 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Jamison Sites, Melanie Gulden and originally appeared on 2021-05-25.
2020 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Weinlander Fitzhugh is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Weinlander Fitzhugh can assist you, please call (989) 893-5577.