IRS Team Reports Rise in Crypto Tax Investigations

IRS Team Reports Rise in Crypto Tax Investigations – The United Internal Revenue Service (IRS) Criminal Investigation (CI) Unit noted a rise in digital asset reporting investigations. The fiscal year 2023 report reveals examinations into non-disclosure of cryptocurrency holdings and failure to report capital gains from transactions.

The IRS investigative branch, in its yearly report unveiled on December 4, disclosed initiating over 2,676 cases uncovering more than $37 billion linked to tax and financial crimes during the fiscal year 2023. The team observed a surge in tax investigations associated with the heightened use of digital assets.

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“These investigations consist of unreported income resulting from failure to report capital gains from the sale of cryptocurrency, income earned from mining cryptocurrency, or income received in the form of cryptocurrency, such as wages, rental income, and gambling winnings,” said the Criminal Investigation Unit. “CI is also seeing evasion of payment violations, where the taxpayer fails to disclose ownership of cryptocurrency in an attempt to shield holdings.”

Since 2019, the IRS has mandated U.S. taxpayers to explicitly report digital asset transactions, consistently incorporating this inquiry into tax forms each subsequent year. In the report, CI chief Jim Lee said that “most people using cryptocurrency do so for legitimate purposes,” but digital assets pose a risk for financing terrorism, ransomware attacks, and other illicit activities.

Since intensifying cryptocurrency-related crime investigations in 2015, the IRS has confiscated over $10 billion in digital assets. Additionally, the government entity has put forth new regulations aimed at reducing tax evasion by enhancing reporting requirements for brokers. These efforts underscore the importance of staying abreast of regulatory changes and adhering to reporting requirements in the dynamic world of cryptocurrency.

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