The IRS will receive an allocation of about $80 billion over the next ten years as part of the Act.
Many in the crypto sector expect 2022 to be the year of total regulatory and legislative certainty for crypto assets in the United States. Indeed, President Biden’s Executive Order issued earlier this year compelled and directed federal agencies to offer clear, orderly, and effective instructions.
As seen in the past that sections and portions of legislation that most people would not consider crypto-focused can include highly important rules influencing the crypto ecosystem. For example, the Infrastructure Act, which was enacted into law last year, includes revisions to the definition of broker that will fundamentally necessitate tax information reporting for many organizations engaging in cryptocurrency trading.
The Senate has officially enacted the Inflation Reduction Act, which includes broad changes in several parts of the federal government, including the Internal Revenue Service.
The IRS will receive an allocation of about $80 billion over the next ten years as part of the Act. To put this in context, the IRS’s monthly budget is around $12.6 billion for 2022, representing a nearly 75% rise on a yearly basis. Simply expressed, there has been a significant rise in spending on IRS operations and activities.
In terms of the uses for the billions of dollars, you might wonder what the IRS intends to do with them. The truth is that the majority of the cash will go to compliance and enforcement initiatives. This could imply a significant increase in the level and number of audits performed, as well as the number of audit candidates pursued by the Service.
Here is an excerpt from the relevant portion of the statute explaining the IRS’s activities in relation to the $80 billion. One noteworthy feature in this part is the clear need for Digital Asset monitoring and compliance efforts – in other words, crypto enforcement.
“…(ii) ENFORCEMENT.—For necessary expenses for tax enforcement activities of the Internal Revenue Service to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities, …”
It remains to be seen how and when these guidelines will be implemented. However, with this amount of money and the inclusion of digital assets in the Act, it becomes evident that individuals and institutional investors alike must be much more knowledgeable about all tax requirements associated with their digital asset activities.
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