The landscape of tax crimes involving cryptocurrencies is evolving, with the IRS now focusing more on what they call “pure crypto tax crimes.” These crimes involve violations of Title 26 of the US Code, specifically related to federal income tax. Taxpayers are increasingly being scrutinized for failing to report income from crypto sales and attempting to conceal their true basis in cryptocurrencies. According to IRS criminal investigation chief Guy Ficco, this trend is on the rise and is expected to continue in the future.
Ficco noted an “uptick” in tax-reporting crimes and warned that the IRS will bring forward more charges related to crypto tax crimes. The scope of IRS investigations has expanded beyond scams and embezzlement to specifically target tax crimes involving cryptocurrency. With the growing popularity and adoption of cryptocurrencies, the IRS anticipates that these crimes will become more prevalent and will play a significant role in broader criminal activities such as phone scams, romance scams, and even pig butchering.
In response to the increasing number of tax crimes involving cryptocurrencies, the IRS recently issued a reminder to taxpayers emphasizing the importance of reporting taxes on crypto transactions. Individuals are required to report income from crypto sales, payments received in crypto, and any other crypto-related transactions. Despite the IRS introducing tax reporting rules for crypto investors as far back as 2014, reports indicate that a significant number of investors are still failing to comply with these regulations.
The IRS has ramped up its enforcement efforts around crypto tax crimes by hiring experts specifically focused on cryptocurrencies. Tax professionals are bracing themselves for increased scrutiny, with Ficco’s predecessor, Jim Lee, hinting at a sharper focus on tax issues related to cryptocurrencies. In fact, half of the active crypto investigations in 2023 were linked to tax issues, indicating a growing concern within the IRS about compliance with tax regulations in the crypto space.
Taxpayers need to be aware of the heightened scrutiny surrounding tax crimes involving cryptocurrencies. The IRS is cracking down on individuals who fail to report income from crypto transactions and is expected to bring forward more charges in the coming years. To avoid legal repercussions, taxpayers must ensure they are in compliance with tax reporting rules related to cryptocurrencies and accurately report their crypto-related income to the IRS. Failure to do so could result in severe consequences.
