The $ 1 trillion U.S. Infrastructure Bill, signed by President Joe Biden last week, contains provisions that tax cryptocurrency transactions and bring some benefits to the U.S. government. $ 2.8 billion annually..
So, frankly, it’s not a lot of money.
The problem is that the crypto tax component of the law is not clearly written and there is a risk that the government will crush the fast-growing part of the economy.
The infrastructure bill states that “fenders” need to track these things. However, you can conclude smart contracts without mediation. If so, who is responsible for reporting? Are miners considered intermediaries?
At some level, there is no doubt that the government will have to pay taxes from cryptocurrency transactions, just like any other return on investment, or like a transfer of property. However, the ambiguity of the law risks preventing trading platforms from gaining access to US citizens or simply preventing small crypto investors from entering or staying in the market.
I’ve seen this before. Due to FATCA, a Foreign Account Tax Compliance Act, some financial institutions have blocked the use of services by US citizens because compliance rules are too burdensome for risks and potential benefits.
Below, we need to consider some scenarios (simple and complex).
- If you buy a car using Bitcoin, you buy a car using Bitcoin when you are taxed. It’s easy.
- If you go to a crypto exchange and use dollars to buy Ether, it should be easy to understand how to tax. This is also a simple transaction.
- Transferring crypto to a smart contract that is used to hold NFTs purchased by others quickly confuses the situation and risks personal handling taxes with the complexity of corporate transactions.
The minimum amount is $ 10,000. This is a carry-over from the Bank Secrecy Act. Transactions below that amount are not taxed, but $ 10,000 is a fairly low amount needed to deal with complex tax situations.
Trading platforms and investor tax filings can be daunting enough to discourage further investments, and ultimately the tax can be worthless or at least generate far less income than estimated. ..
And for the IRS, this can be a complex tax to audit. You need a way to associate identities with these transactions. This is already done on trading platforms like Coinbase, but individual miners usually don’t.
Something of note about this particular bill is that tax law is mostly problematic at first, but usually becomes apparent over time. The infrastructure bill seemed to be moving in the opposite direction. Congress started with a number of impacts ($ 1.1 trillion) — and then sought to find a way to generate enough tax to match the number.
This is unusual in some respects, but it probably points to our current political situation. Politicians were trying to keep costs as low as possible, starting with the specific program they wanted to fund. This time, the two parties were fighting to promise more numbers when they came to power. (In the end, Trump worked on a $ 2 trillion infrastructure bill, but the law was never signed.)
It’s a bit strange politically, as the mayors offer to receive their salaries in cryptocurrencies, from Miami to New York, and across the political spectrum. At the national level, on the other hand, there is no clear guidance on the federal long-term plan.
Ultimately, cryptocurrencies are here to stay in some way, and the federal government needs to take the approach seriously by talking to experts such as economists, scholars, and cryptocurrency platform developers.
Congress must clarify how the infrastructure bill will impact cryptocurrency – TechCrunch Source link Congress must clarify how the infrastructure bill will impact cryptocurrency – TechCrunch
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