The Internal Revenue Service has stated that each year around $1 trillion is failed to be collected. The government agency partly holds innovations in the cryptocurrency sphere responsible for this.
IRS Commissioner Charles Rettig testified in front of the Senate Finance Committee citing cryptocurrencies to be a major source of uncollected tax revenues. Cryptocurrencies are taxed as capital assets which imposes a capital gains tax on the premium trade of the cryptocurrency; however, a majority of investors and traders are not aware of the capital gains trade. Moreover, the cryptocurrency market is largely unregulated with only bits of taxpayers’ information available to government agencies which further jeopardizes the tax collection process.
The commissioner also specifically mentioned non-fungible tokens and the replicative nature of cryptocurrencies. The cryptocurrency market is continuously evolving with new innovations everyday which makes it hard for tax payers and tax collectors to stay up to date with requirements and regulations. NFT in particular have raised a lot of questions related to its taxation.
Rettig furthered the importance of cryptocurrency reporting. The disclosure of taxpayer information is also crucial for the improvement in tax collection process. The commissioner assured the committee that the IRS cybercrime unit active on the dark web following cryptocurrency transactions for tax fraud and evasion.
