White House Evaluates IRS Crypto Proposal for Taxation

The White House is evaluating an IRS proposal focused on taxing US citizens’ outbound crypto holdings. This action emphasizes tightening reporting requirements for foreign digital assets and aims to close offshore tax avoidance opportunities.

The review involves the IRS and the Administration’s Working Group on Digital Asset Markets. No direct comments from key figures like President Joe Biden or Treasury Secretary Janet Yellen have been released on this proposal yet.

Impact on Individuals and Institutions

Implementing such a proposal could greatly affect individuals and institutions holding major cryptocurrencies overseas. BTC, ETH, and altcoins owned by US taxpayers abroad may face new disclosure rules, potentially increasing their tax obligations.

Financially, this proposal may generate up to $26 billion for the government over the next decade. It aims to curb tax evasion, aligning US practices with international frameworks such as the OECD CARF.

Regulatory Shifts and Compliance

The proposal revisits past regulatory moves, including the 2021 broker reporting mandate, highlighting ongoing efforts to enhance tax compliance and reporting in the digital asset space. “As crypto grows in popularity, U.S. policymakers may be more interested in ensuring U.S. taxpayers are not shifting transactions abroad purely to avoid U.S. taxes on crypto gains,” a policy analyst from the Bipartisan Policy Center noted.

Potential outcomes include new IRS forms and expanded reporting obligations for exchanges. These regulatory shifts may increase compliance costs and complexity for US citizens engaging in digital asset transactions abroad.