US senators call to implement strict tax reporting rules for crypto

US Senators urge Treasury and IRS to implement crypto tax rules by December 2023, warning of potential $1.5 billion revenue loss.

Four U.S. Senators, Elizabeth Warren, Robert P. Casey, Jr., Richard Blumenthal, and Bernard Sanders, have sent a letter to the Department of the Treasury and the Internal Revenue Service, alerting them of the potential loss of tax revenue if crypto tax reporting rules are not implemented by Dec. 31, 2023.

Referring to the Infrastructure Investment and Jobs Act (IIJA), passed by Congress in November 2021, which directed the Treasury and the Internal Revenue Service (IRS) to implement rules for third-party crypto brokers, the Senators reported that the proposed regulations had yet to be published. 

The letter reveals that there would be an estimated loss of $1.5 billion in tax revenue in 2024 if the rules were not implemented.

It cites the research that suggests that “at least half the taxes owed on crypto transactions go unpaid each year, and that crypto tax invasion accounts for about 10 percent of total unpaid taxes annually.” 

Riding on this, the Senators iterated why the new rules were necessary. The reasons include closing the crypto tax gap and raising “$1.5 billion in tax revenue in 2024 alone and almost $28 billion over the next eight years.” 

By the time the IIJA was passed in November 2021, the U.S. had faced a $1 trillion tax gap, and the growing tax gap was attributed to the $2 trillion cryptocurrency sector. According to research, the yet-to-be-implemented rule set means that crypto tax evaders keep cheating the IRS of at least $50 billion a year, even though it is speculated that the estimated amount is too small.

Conversations around cryptocurrency taxes and evasion are becoming more frequent. Fairly recently, the E.U. set up the Digital Finance Package proposal known as the DAC8 amendment to firm up regulations on cryptocurrency and combat tax-related criminal activities.

The U.S. Senate and digital assets

The U.S. Senate has, over time, stayed at the forefront concerning bills and regulations on digital assets. They strive to provide clarity and consistency and create a more relatable sense of the evolving cryptocurrency space. Different reforms, advances, combat tactics, and recommendations have been proposed by the Senate at other times.

However, the most recent letter has given the IRS and the Treasury a deadline of Aug. 15, 2023, to respond to the four questions asked. The third question is, “Should Treasury fail to implement crypto tax reporting rules by the December 31, 2023 deadline established by Congress, how much tax revenue does the Department estimate it would risk losing in the 2024 calendar year?”