Once seen as the free market for trading, the United States recently released some new proposals that will affect cryptocurrency reporting through its American Families Plan. Would this have any major implications?
Curbing tax evasion or just taxation?
This came about in May 2021 when U.S. President Joe Biden followed up to the release of the tax compliance agenda under the American Families Plan. The idea is to come down hard on tax evasion and one of the biggest concerns war on cryptocurrencies. Some changes have proposed that deal with cryptocurrency reporting. If that is passed, it means that traders will now be more scrutinized and come under the spotlight more than before.
What does this mean for Americans?
The general rule of thumb here is that a new rule would be implemented for businesses and crypto exchanges that any transactions with a fair market value of more than US$10,000 would need to be reported. Currently, such a rule is enforced for banking services. Anyone who deposits any amount over US$10,000 into a checking account would come under this law. The bank would need to report that. So, if this is enforced for cryptocurrencies, it would contribute to the efforts for more regulation by the government on digital assets.
In a 2019 report on crypto regulation, moves like these would set out to benefit investors and would bring more good like pushing for more development of new tech, minimizing illicit payments with crypto-assets and also could reduce attacks on the platforms. This could be the first of many more to come including enforcement action in the near future.
How would this affect investors?
Investors and traders have been since been advised to take records of their digital currencies. Such records need to be updated including the transactions and other services. The IRS regards cryptos as property which means they are treated as capital gains (or losses). Hence, you should:
- Be aware of your investment capital which is the initial amount you put in the beginning.
- The location where your crypto is being stored
- Transfers or transactions that are made
- The date your bought (or sold) your crypto)