Crypto Transfers Targeted by Biden Administration

It seems that the wild west of crypto is nearing an end. The Biden administration has recently released a new outline for its tax compliance plan. The report, released by the U.S. Treasury Department, outlines this requirement as follows:

“As with cash transactions, businesses that receive crypto assets with a fair market value of more than $10,000 will also be reported on."



What does this mean?

Put simply, this means that businesses must file a transaction report with the Internal Revenue Service  (IRS) when they receive a sum of crypto currency which is worth at least $10,000. This is to correlate with the already established reporting which businesses do with cash transactions. Banks and other financial institutions already report inflows and outflows of $10,000 or more to the IRS. This is used as a way to detect and minimize unreported income.

Because cryptocurrencies are often used as cash, the new rule plans to expand reporting bodies. The Biden administration aims to subject crypto asset exchanges, custodians, and payment service companies to this rule.

For example, if you spend $11,000 worth of Bitcoin to purchase a new car, then every business involved in that purchase will report it to the IRS. If your Bitcoin was stored with a crypto custodian, they will send a notice to the IRS. The car company you purchased from will also notify the IRS.

This means that the IRS will know you had purchased at least $11,000 worth of Bitcoin before your car purchase. It could possibly tax you on that amount. However, you can lower that payment by consulting a tax professional. This is highly recommended because the IRS’s new rules can be confusing to understand.

You might end up paying more than you need to if you're not careful!

Why did the Biden administration do this?

Since 2020, the crypto market has grown to and exceeded $2 trillion. This massive acceptance of the technology among the general public is considered a positive by many Americans. It is likely that crypto will continue this rise into the next decade.

As far as the U.S. government is concerned, however, this wide acceptance poses a massive threat for tax collection. The IRS is already aware of the millions it lost in tax revenue due to the federal government’s slow adoption of crypto and blockchain technology. The Biden administration is concerned about the use of cryptocurrency, especially the use of it by criminals and other bad actors. Tax evasion was a notable concern for the administration in the report.

In actuality, the IRS has recently announced Operation Hidden Treasure in March 2021. The operation is a collaboration of IRS Criminal Investigation and its Fraud Enforcement Office. Its aim is to find taxpayers with unreported income from cryptocurrency transactions specifically. It intends to get taxpayers to pay back taxes, interest and penalties.

The Biden administration’s latest move on cryptocurrencies like Bitcoin, Dogecoin, and Ethereum is only part of the story. It reflects a wider trend towards Uncle Sam figuring out how to get his share of crypto’s growth. The IRS will tax your crypto, but a smart tax pro can lower how much it takes from you.