Five Important U.S. Tax Considerations in Light of Upcoming and Proposed Changes

It’s post-tax season in the United States, and now is also a good time for investors to prepare their tax strategies for the 2022 and 2023 tax years. With some pending and proposed changes on the horizon for the U.S. tax regime, there are some new important considerations foreign investors need to keep in mind. For example:

1. Changes to 1040 Forms Specifically Address Crypto Investments

For the first time, IRS Form 1040 and its variants (the main income tax reporting form in the U.S.) specifically required taxpayers to disclose their cryptocurrency investment activities. The form now includes the following question: “At any time during (year), did you receive, sell, or otherwise acquire any financial interest in any virtual currency?” While the IRS has positioned this as a way to remind crypto investors of their reporting obligations, its primary purpose is to aid the IRS in its efforts to crack down on cryptocurrency-related tax fraud.

2. New Cryptocurrency Tax Reporting Requirements Likely to Take Effect in 2022

In addition to the new IRS Form 1040 disclosure, foreign crypto investors may also be subject to additional reporting requirements beginning in 2022. The 2021 Infrastructure Investment in Jobs Act (IIJA) laid the groundwork for three new reporting requirements that the U.S. Treasury Department is currently working to implement. Under the IIJA, investors must report crypto transactions valued at $10,000 or more, transactions that move crypto assets out of exchanges are also subject to reporting, and crypto “brokers” will be required to disclose their customers’ transactions as well.

3. Crypto-Related FBAR Changes May Also Be Coming

In 2020, the Financial Crimes Enforcement Network (FinCEN) announced that it intended to add offshore cryptocurrency accounts to the list of foreign financial accounts subject to disclosure on the Report of Foreign Bank and Financial Accounts (FBAR). FinCEN sought additional comment on its proposal in 2021, and it remains possible that FinCEN could implement this new requirement for the 2022 reporting year.

4. Global Intangible Low-Taxed Income (GILTI) Changes Also Proposed

Proposed amendments to the Build Back Better Act would impact foreign investors as well. The proposals include a 15 percent tax rate for global intangible low-taxed income (GILTI) of controlled foreign corporations. If the change is enacted this year, a blended rate will apply for fiscal tax years spanning the 2022 and 2023 calendar years.

5. BEAT Tax Increases May Be Coming

Changes to the base erosion and anti-abuse tax (BEAT) for foreign investors may also be coming in 2022. A House proposal would increase the BEAT tax rate to 12.5 percent for tax years beginning in 2023, 15 percent for tax years beginning in 2024, and 18 percent for tax years beginning in 2025 and later.

Speak with an International Law Attorney at GS2Law in Confidence

The international law attorneys at GS2Law represent foreign investors in tax and other matters. If you have questions or concerns about your upcoming obligations to the IRS, we invite you can contact Yosef B. Shwedel at ys@gs2law.com.