“The global nature of the crypto market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers,” the Greenbook proposal said.
The Treasury, prior to the start of this year, was already working on proposed regulations under existing law that would require cryptocurrency brokers to report certain information to the IRS, including the identities of their customers and the gross proceeds from sales.
Account Flows
The Greenbook suggests that project can still move forward through the regulatory process, but the new requirement on indirect foreign investors will need to be added legislatively, according to Lisa Zarlenga, a partner at Steptoe & Johnson LLP and former Treasury tax legislative counsel.
The Biden administration would also need legislation to enact its broader proposal to require financial account reporting by banks and other financial institutions, including cryptocurrency exchanges. The Greenbook provides more details on that provision, which was previewed in prior outlines released by the administration.
Under the proposal, financial institutions would have to report gross account inflows and outflows with a breakdown for physical cash, transactions with a foreign account and transfers to and from another account with the same owner. The requirement would apply to all business and personal accounts except those below a $600 threshold.
The Greenbook also proposed separate reporting requirements for situations in which taxpayers buy cryptocurrency assets from one broker and then transfer them to another. In addition, businesses that receive transfers of cryptocurrency valued at more than $10,000 would have to report those transactions to the IRS.
“They’re really looking to gather as much information on the purchase, sale and movement of digital assets as possible,” said Evan Fox, a director at Marcum LLP. The fact that they’re taking so much interest in cryptocurrency validates the asset class—which many in the industry see as a good thing, he said.
The Biden administration is proposing that all of the new reporting requirements go into effect in 2023, which some tax professionals said may be a fast turnaround for the IRS and private sector.
“That seems ambitious,” Castro said.
This article was provided by Bloomberg News.