White House released the budget plan for 2022 that includes new crypto reporting requirements. There are two proposals mentioned in the document that concern additional requirements for the cryptocurrency community. The first proposal would “expand broker information reporting with respect to cryptocurrency assets.”
In the document, you can find the following, “The proposal would require brokers, including entities such as U.S. crypto asset exchanges and hosted wallet providers, to report information relating to certain passive entities and their substantial foreign owners when reporting with respect to crypto assets held by those entities in an account with the broker”.
The explanation of the proposal
The proposal includes gross proceeds, sales and “substantial foreign owners”. According to the Treasury Department document, tax evasion using crypto assets is a rapidly growing problem.
The paper said that since the industry is entirely digital, taxpayers can transact with offshore crypto exchanges and wallet providers without leaving the United States. Thus, the regulations would allow for income from the sale or holding of cryptocurrencies being included in the Internal Revenue Service and other relevant parties.
Comprehensive financial account reporting
The second proposal of the budget plan is about a “comprehensive financial account reporting” structure for tax compliance purposes. Financial institutions would be required to report data on user accounts with a breakdown on different types of transfers above the minimal threshold.
The minimal threshold is defined of $600. According to the document, crypto asset exchanges and custodians face the same requirements. The proposal said, “Separately, reporting requirements would apply in cases in which taxpayers buy crypto assets from one broker and then transfer the crypto assets to another broker, and businesses that receive crypto assets in transactions with a fair market value of more than $10,000 would have to report such transactions”.
Financial Crimes Enforcement Network
The mission of the Financial Crimes Enforcement Network is to enhance U.S. national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S. and international financial systems. Financial Crimes Enforcement proposal is similar to the Treasury Department proposal. The last one proposed that financial institution and other businesses, which receive transfers of over $10,000 in crypto, to report those to the IRS.
Cryptocurrencies in the United States are recognized as property. The amount of tax payments for members of the American crypto community is calculated based on transactions with digital assets. For example, for a deal up to $ 9,700, the user will have to pay 10% in tax.
Taxing crypto in 2020
The American authorities took an advantageous position in advance by attracting participants in the digital asset market. In mid-July 2020, the IRS signed a contract with the popular cryptocurrency exchange Coinbase. As part of the agreements, the developers of the trading platform provide the regulator with software for cryptocurrency transactions.
There are several ways to pay US digital asset tax. For example, a user can register in certain applications. The programs automatically collect information about transactions with cryptocurrencies, fill out the necessary forms and transfer the information to the tax office.