- The United States Internal Revenue Service Commissioner Charles Rettig asked for Congressional authority to issue new regulations on cryptocurrencies.
- The commissioner said it needs to have a clear dictate from Congress on the agency’s authority to collect critical information.
- Rettig estimates that the current tax gap is at $1 trillion a year.
The United States Internal Revenue Service (IRS) Commissioner Charles Rettig stated that Congress should provide more clarity on collecting information for cryptocurrency transfers valued at over $10,000.
IRS needs congressional authority to regulate crypto
In a hearing before the Senate Finance Committee, IRS Commissioner Charles Rettig sought explicit congressional authority to regulate cryptocurrencies.
Commissioner Charles Rettig emphasized that most digital currencies are designed to “stay off the radar screen,” and therefore, the IRS would be challenged.
With the cryptocurrency market capitalization over $2 trillion and over 8,600 exchanges worldwide, Rettig stated that there had been many obstacles. He said:
“We get challenged frequently, and to have a clear dictate from Congress on the authority for us to collect that information is critical.”
The Commissioner estimates that the tax gap – the difference between taxes legally owed and collected – is at around $1 trillion a year and that massive profits from the surge in cryptocurrency prices have escaped the IRS. He added:
“The IRS currently issues summonses to third parties to get information on cryptocurrency users, without naming specific individuals. It is also active in both civil and criminal enforcement, but the agency needs additional tools and resources from Congress.”
The Biden administration has recently called for banks and crypto exchanges to report crypto transactions over $10,000 to the IRS to reduce the tax gap. The Treasury is cracking down on tax evasion involving the new asset class as part of the President’s compliance measures.
Following Republican Senator Mike Crapo’s criticism of the reporting limit, citing privacy concerns, the Treasury has proposed reducing the threshold to $600 from $10,000.
The proposal, along with modernized computer systems, could aid the IRS in determining which taxpayers not to target for audits, as the agency would prefer to target wealthier individuals who are more prone to tax evasion.
Biden’s national security adviser Jack Sullivan announced earlier this week that cybersecurity and examining the role of cryptocurrency in cyberattacks must be a “priority” for countries in the Group of 7.
Sullivan’s comments come after the ransomware cyberattacks targeting US entities, including Colonial Pipeline. He added that Bitcoin and other cryptocurrencies are often the core of ransomware attacks and other transactions involving criminal groups.