What You Need to Know
- Cryptocurrencies and other technologies have created huge opportunities for tax evasion, Sen. Ron Wyden said.
- The Biden administration’s new budget proposal calls for a 10% increase in IRS funding.
- Wyden said Republican budget cuts hindered the IRS' ability to detect tax evasion by high-income people.
The actual annual tax gap possibly exceeds $1 trillion per year, IRS Commissioner Charles Rettig told senators Tuesday.
At a hearing held by the Senate Finance Committee on the 2021 tax filing season, Ron Wyden, D-Ore., chairman of the committee, said the tax gap reflects the difference between taxes owed and what’s not being collected from “tax cheats.”
“The most recent official estimate pegs the tax gap at $381 billion per year, but it looks all the way back to data from 2011 through 2013,” he said in his opening remarks. “That means these estimates are out of date as soon as they’re released.”
The fact is, Wyden continued, “our economy has changed and expanded. In 2011, one Bitcoin couldn’t buy you a ham sandwich. Today cryptocurrencies and other technologies create huge new opportunities for tax cheats to rip off the American people.”
What Your Peers Are Reading
Wyden asked Rettig: “What is your personal opinion about how big the annual tax gap actually is?”
Rettig explained that while the IRS plans to issue an updated tax gap estimate next year, the published tax gap estimate is for tax years 2011 to 2013, which has a gross tax gap of $441 billion.
In 2011, “folks were generally unaware of the term cryptocurrency, Bitcoin,” Rettig said, noting that there are more than 8,600 cryptocurrencies in the marketplace and the worldwide market cap for cryptocurrencies is nearly $2 trillion.
Rep. Rob Portman, R-Ohio, said in the hearing that he’s working on a cryptocurrency bill that would “define cryptocurrency for tax purposes and try to provide appropriate reporting rules.”