The administration of U.S. President Joe Biden wants the Internal Revenue Service to do a better job of collecting from taxpayers who trade cryptocurrency. But the Treasury Department's new proposal to require reporting to the IRS when businesses receive at least $10,000 in a virtual currency won't do much to improve tax compliance.
According to the Treasury, businesses should have to report large crypto (and cash) transactions to deter money laundering and tax evasion. The use of digital currencies like Bitcoin is expected to grow, and a separate Biden proposal to require financial institutions to send the IRS information detailing bank account flows would make crypto transactions a tempting way to hide business income if not reported, the thinking goes.
That all may be true. But the new reporting requirement for businesses, and a call for crypto exchanges to report on customers' accounts, ignores a much easier, more effective way to narrow the $600 billion difference between what Americans owed in taxes and what the IRS actually collected in 2019. And that's for the IRS to provide better, faster and more informed guidance for crypto taxpayers.