- The IRS is expecting a rise in crypto tax evasion cases this year as the agency intensifies its scrutiny of tax reporting during the tax season.
- This increased focus on crypto-related tax crimes suggests a shift in the agency’s priorities and highlights the importance of compliance for taxpayers involved in cryptocurrency transactions.
The United States Internal Revenue Service (IRS) is bracing itself for an increase in crypto-related tax evasion cases as U.S. citizens face the annual tax filing deadline on April 15. IRS criminal investigation chief Guy Ficco indicated the agency is becoming more adept at handling crypto tax crimes and expects a rise in the number of such cases going forward.
Ficco explained to CNBC during the Chainalysis Links event in New York that Title 26 tax cases, which involve willful evasion of tax payments through deceit or omission, are likely to increase this year. Previously, cryptocurrencies were primarily linked to financial crimes such as fraud, scams, and money laundering.
However, Ficco stated that his agency has observed a substantial rise in “pure crypto tax crimes” and anticipates further growth in the near future.
The IRS is preparing for this uptick in crypto tax crimes by partnering with blockchain analysis firm Chainalysis and other law enforcement agencies. Ficco noted that while the IRS’s special agents are skilled at tracing and tracking financial transactions, Chainalysis and similar firms offer specialized expertise and tools necessary in the crypto world.
To avoid penalties, taxpayers are advised to accurately report income generated from crypto sales and to disclose the true basis of their crypto assets. Ficco provided a general guideline: if you acquire an asset for $10,000 and sell it for $20,000, you must report and pay tax on the $10,000 gain.
The IRS has taken a more assertive approach to investigating and prosecuting individuals who have previously failed to report their crypto taxes or have actively provided false information on their tax returns. For example, on February 6, a federal grand jury indicted Frank Richard Ahlgren III from Texas for filing false tax returns related to over $4 million in gains from Bitcoin transactions.
The increased focus on crypto tax evasion reflects the IRS’s growing vigilance in monitoring and addressing non-compliance in this rapidly evolving digital asset space. By working with industry partners and enhancing its expertise, the IRS aims to ensure tax compliance and uphold the integrity of the financial system.
IRS Strengthens Efforts Against Crypto Tax Evasion
The IRS’s commitment to tackling crypto tax evasion is evident through its collaboration with industry experts and heightened focus on compliance. By monitoring crypto-related tax activities and leveraging partnerships with blockchain analytics firms, the IRS aims to effectively address tax evasion in the rapidly evolving crypto space. Taxpayers should remain vigilant and ensure accurate reporting to avoid potential penalties. As the IRS intensifies its enforcement, it sends a clear message about its dedication to upholding the integrity of the tax system in the digital asset era.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
