U.S. Congressmen Brad Sherman and Stephen Lynch have sent a letter to heads of the Treasury and the Internal Revenue Service (IRS). In the letter, addressed to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, the Congressmen questioned the tax compliance practices of crypto firms. The two pushed for the establishment of tax laws for the cryptocurrency sector. Moreover, the Congressmen blamed the crypto industry for tax evasion. Moreover, the duo said that the cryptocurrency industry is a major source of the U.S. tax gap.
The #Cryptocurrency industry has been a major source of tax evasion & a significant part of the nation's tax gap.— Congressman Brad Sherman (@BradSherman) June 5, 2023
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
The pair referred to an audit report from September 2020 in which the Treasury Inspector General for Tax Administration (TIGTA) noted that due to a lack of reporting, the IRS was unable to identify taxpayers who supported cryptocurrency.
What about the Bipartisan Infrastructure Bill for crypto taxes?
Beginning in 2023, taxpayers need to report crypto transactions under the Infrastructure Investment and Jobs Act (Bipartisan Infrastructure Bill). However, the Congressmen said that the “regulations have yet to be promulgated.”
Congressmen Sherman and Lynch requested the rapid publishing of the new regulations. They propose this in order to “close the tax gap and bring the cryptocurrency industry into full tax compliance.”
The Biden administration redoubled its efforts in May to impose a 30% tax on cryptocurrency miners. This was initially presented in March 2023 as a component of Biden’s FY2024 budget. The legislation was passed in May to raise the U.S. debt ceiling, however, it did not include the planned tax on cryptocurrency mining.
As of now, worries about a 30% tax on cryptocurrency mining have subsided. However, proponents of the technology think it is only a temporary solution. Nic Carter, the co-founder of Coin Metrics, predicted that the administration will try to re-incorporate the tax in the future.
The U.S. is one of the few major economies that does not a proper regulation on crypto. The European Union recently passed the MiCA (Markets in Crypto Assets) regulations for the bloc. Many expect other nations to borrow from the EU’s rulebook for their own jurisdictions.