The Internal Revenue Service (IRS) is in a bind. The tax gap – the difference between the taxes paid and the ones owed – has increased, reportedly topping $500 billion a year. This means they’ll need additional funding to pursue any potential plans, such as a cryptocurrency tax plan.
This gap exists for different reasons. It varies from those who report less than their liability on their tax returns, underpayment to non-filing.
Just this morning, a panel on CNBC’s Squawk Box agreed that the agency needs access to funds to reduce the tax gap and enforce its policies. But, this doesn’t seem like a priority for the Trump administration or Congress. Without providing resources for enforcement, it doesn’t matter the type of tax plan that is pushed forward by the government, there will always be money on the table.
IRS’s Clarity for Cryptocurrencies
After so many calls for clarity on cryptocurrency taxes, the IRS finally beamed its light on the sector. A month ago, the IRS provided an update to the popular Form 1040, which asked taxpayers whether they had made any transactions in cryptocurrencies. The agency also published guidelines on how it views cryptocurrency taxes but not before it created confusion on how it would tax airdrops and hard forks, going forward. But, none of these would matter if it can’t go after tax evaders. Figures released by the United States Treasury in the past pegged the ROI for the IRS at about $5 for $1; about a 400 percent return. In addition to that, a report from the Government Accountability Office cites even higher enforcement returns for the IRS, pegging returns between $11 and $13 for each $1.
Reducing the Deficit
Back in 2018, the Congressional Budget Office (CBO) reported that the IRS could be a valuable asset in reducing the budget deficit, estimating that increasing the budget of the tax authority could cut the federal deficit by about $35 billion over the next decade. Several arguments have been made over how this could work. Lately, there has been a lot of commentary from leading Democrats running for President over how tax revenues can be increased by taxing the rich more, while others have called for an entirely new tax code. Irrespective of the tax plan chosen, what matters is the provision of resources for the agency to carry out its duties.Images are courtesy of Shutterstock.
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Jimmy Aki
Based in the United Kingdom, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills, having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for blockchain regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.
Based in the United Kingdom, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills, having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for blockchain regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.
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