The Biden administration’s tax enforcement proposal would require that cryptocurrency transfers over $10,000 be reported to the Internal Revenue Service and would more than double the IRS workforce over a decade, the U.S. Treasury said on Thursday.
The plans were part of a Treasury report detailing the Biden Administration’s proposal to invest some $80 billion into the U.S. tax agency through 2031 to improve compliance an revenue collections.
“As with cash transactions, businesses that receive cryptoassets with a fair market value of more than $10,000 would also be reported on,” the Treasury said in the report, which noted that these assets, are likely to grow in importance over the next decade as a part of business income.
Cryptocurrency assets currently have a market capitalization of about $2 trillion.
The Treasury disclosure blunted a rally in the dollar value of bitcoin on Thursday – to a 6% gain from an earlier 10% rise read more . The gains came a day after bitcoin fell as much as 30% and number two digital currency ether fell 45%.
The reporting requirements, depending on how they are structured, could also allow the government to gain insight about U.S. companies that are extorted to pay hackers ransoms, almost invariably in cryptocurrency, to regain control of their IT systems.
Law enforcement and private sector cybersecurity experts alike have complained that a lack of transparency around these ransonware incidents contributes to their continued occurrence.
The Treasury’s report said the proposed IRS investments would add a total of more than 86,000 full-time equivalent employees to the agency’s ranks over the next decade, reversing a long-term decline and more than doubling the 2019 IRS workforce of 73,554 full-time equivalent positions.
It said the investment plan would allow for the hiring of least 5,000 additional enforcement personnel over the decade.
SHRINK THE GAP
The Treasury said its proposal would shrink by about 10% the “tax gap” that it estimates at about $7 trillion or 3% of U.S. economic output over the next decade, raising some $700 billion in a “conservative” estimate.
The tax gap – the difference between taxes legally owed and those collected by the IRS – was estimated at $584 billion in 2019, according to the policy paper.
By the second decade, it estimated that the investments would yield $1.6 trillion in additional revenue, as revenue agents hired in prior years gain experience in dealing with highly complex tax returns filed by wealthy individuals.
The IRS investment plan also would replace the Treasury’s 1960s-era computer architecture with new machine-learning-capable systems that will be better able to detect suspect tax returns. IRS is the only federal agency with computers that run on the antiquated Common Business-Oriented Language (COBOL) system, Treasury said.