Taxes
Top 100 Crypto
IRS Steps Up Scrutiny on Cryptocurrency Taxes

IRS Intensifies Scrutiny on Cryptocurrency Taxes

Dec 05, 2023
Read in 3 mins
Share!
Share!

Heightened IRS focus on crypto taxes raises concerns for investors and businesses.

The U.S. Internal Revenue Service (IRS) has ramped up its examination of cryptocurrency transactions, leading to potential tax liabilities for many individuals and businesses. This increased scrutiny comes in the wake of a surge in cryptocurrency popularity, drawing the attention of not just investors and enthusiasts, but also tax authorities keen on ensuring compliance with tax regulations.

The IRS’s criminal unit has seen a significant uptick in cases involving cryptocurrency tax evasion, according to a recent update. This unit, instrumental in the investigation of Binance Holdings Ltd., has initiated more than 2,676 cases in the fiscal year 2023, uncovering over $37 billion in tax and financial offenses. The rise in digital asset usage has led to a corresponding increase in tax inquiries.

The investigations primarily involve unreported income from various cryptocurrency-related activities, such as failure to report capital gains from cryptocurrency sales, income from mining, and income received in cryptocurrency form, like wages, rental income, and gambling winnings. The IRS has also noted evasion of payment violations, where taxpayers fail to disclose cryptocurrency ownership to protect their holdings.

Jim Lee, the chief of the IRS’s criminal investigative branch, highlighted a significant shift in the nature of cryptocurrency-related inquiries over the past three years. While over 90% of ongoing cryptocurrency investigations were historically devoted to money laundering, about half of the current investigations into digital assets now concern tax-related matters.

Since 2019, the IRS has required individuals to record their digital currency transactions as part of a broader strategy to combat tax avoidance involving digital assets. This approach is not unique to the United States; regulators worldwide, including the United Kingdom’s Her Majesty’s Revenue and Customs (HMRC) and Brazil, are addressing crypto tax issues.

The IRS has seized more than $10 billion in digital assets since intensifying its efforts to pursue crypto-related offenses in 2015. To further curb tax evasion, the agency has proposed additional laws on brokers’ reporting requirements.

The IRS played a crucial role in the criminal investigation into Binance, the world’s largest digital asset exchange, which previously admitted to anti-money laundering and sanctions crimes, leading to a $4.3 billion settlement. The IRS has also actively assisted in significant digital asset seizures, including the recovery of $3.6 billion in Bitcoin stolen during the Bitfinex breach in 2016.

WHAT DO YOU THINK ABOUT THIS CONTENT?
cool.svg cool_white.svg COOL!
notbad.svg notbad_white.svg NOT BAD!
notcool.svg notcool_white.svg NOT COOL!