IRS Expects Surge in Crypto Tax Crimes Ahead of Tax Filing Deadline

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Key Takeaways

  • Guy Ficco stated that the IRS anticipates several Title 26 crypto cases this year
  • Ficco stressed that the IRS is seeing cases where people don’t report income from crypto transactions or hide their digital assets’ true value.

Tax evasion related to cryptocurrencies is expected to surge this year, according to Guy Ficco, the head of criminal investigations at the Internal Revenue Service (IRS). Speaking at the Chainalysis Links event in New York, Ficco revealed that the IRS is bracing for an increase in cases involving tax fraud and evasion linked to digital currencies.

“We anticipate a lot more charged Title 26 crypto cases this year and moving forward,” Ficco stated during his interview with CNBC on Saturday. He highlighted a shift in the nature of crypto-related crimes, noting an uptick in what he called “pure crypto tax crimes.”

Title 26 of the U.S. Code pertains to the statistical work conducted by the U.S. Census Bureau, particularly in the collection of IRS data about households and businesses. Further, it provides conditions under which the IRS may disclose Federal Tax Returns and Return Information (FTI) to other agencies, such as the Census Bureau.

Ficco emphasized that the IRS is now witnessing cases where individuals fail to report income from crypto transactions or conceal the true basis of their digital assets. He attributed this rise to the increasing popularity of cryptocurrencies and their integration into mainstream financial activities.

To combat these crimes, the IRS has partnered with blockchain analysis firm Chainalysis and other law enforcement agencies. Ficco praised the expertise of Chainalysis in navigating the complexities of the crypto world, particularly in tracing and following digital money trails.

“My IRS special agents are phenomenal at tracing and following money, but some of the tools and applications that are needed in the crypto world — that’s where the experts at Chainalysis come in,” he said.

In light of the approaching tax filing deadline for U.S. taxpayers on April 15, Ficco offered some guidance for accurately reporting crypto-related income. He emphasized the importance of understanding the basis of assets and the tax implications of their sale.“This could be purely not reporting income generated from crypto sales, it could be hiding the true basis of crypto,” said Ficco. 

The IRS’s crackdown on crypto tax evasion has intensified, with Ficco highlighting the agency’s aggressive approach towards investigating and prosecuting offenders. A Divly 2023 report has revealed that 1.62% of investors in US paid taxes on crypto as required.

  In February, the IRS appointed two new crypto tax experts from the private sector to tackle crypto tax evasion. This move came on the heels of a federal grand jury indicting a Texas man for submitting false tax returns, sidestepping reporting requirements for over $4 million in Bitcoin gains.

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Saniya Raahath
Saniya Raahath

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