The Internal Revenue Service's (IRS) Criminal Investigation (CI) Unit has witnessed a significant uptick in investigations related to digital asset reporting violations, according to its fiscal year 2023 report. The CI Unit initiated over 2,676 cases, identifying more than $37 billion in tax and financial crimes. The report highlights an increase in the use of digital assets, leading to investigations involving unreported income from cryptocurrency transactions, mining activities, and non-disclosure of ownership to evade taxes. This article explores the findings of the IRS CI Unit's annual report and the broader implications for individuals involved in digital asset transactions.
The Criminal Investigation (CI) Unit of the Internal Revenue Service (IRS) has reported a substantial surge in investigations related to digital asset reporting violations, as outlined in its fiscal year 2023 report released on December 4, 2023. The CI Unit initiated over 2,676 cases, identifying more than $37 billion in tax and financial crimes during the fiscal year.
The report emphasizes a notable increase in the use of digital assets, leading to investigations that primarily focus on unreported income resulting from failures to disclose capital gains from cryptocurrency sales, income earned through cryptocurrency mining, and income received in the form of cryptocurrency (e.g., wages, rental income, and gambling winnings).
According to the CI Unit, individuals have been targeted for evasion of payment violations, where taxpayers fail to disclose ownership of cryptocurrency, attempting to shield their holdings from tax obligations. This trend has raised concerns about the potential misuse of digital assets for illicit activities, including financing terrorism, ransomware attacks, and other financial crimes.
The IRS began requiring U.S. taxpayers to specifically report digital asset transactions starting in 2019, adding this question to tax forms annually. CI Chief Jim Lee acknowledged that while most people use cryptocurrency for legitimate purposes, the digital asset landscape poses risks related to various illicit activities.
The report reflects the government's ongoing efforts to combat tax evasion and financial crimes associated with cryptocurrency. Since 2015, the IRS has intensified its investigations into cryptocurrency-related offenses, resulting in the seizure of more than $10 billion in digital assets. To further address tax evasion, the IRS has proposed new regulations on brokers' reporting requirements.
As the IRS continues to focus on digital asset reporting compliance, individuals involved in cryptocurrency transactions should remain vigilant about fulfilling their tax obligations to avoid potential legal repercussions. The annual report underscores the government's commitment to maintaining financial transparency and ensuring compliance within the rapidly evolving landscape of digital assets.
(TURNER WRIGHT, COINTELEGRAPH, 2023)