The Rising Trend of Tax Crimes Involving Crypto

The Rising Trend of Tax Crimes Involving Crypto

The Chief of the IRS criminal investigation division, Guy Ficco, recently highlighted a concerning trend regarding taxpayers engaging in tax crimes related to cryptocurrencies. Ficco pointed out that there has been a surge in what he referred to as “pure crypto tax crimes” falling under Title 26 of the US Code, which deals with federal income tax violations. These crimes typically involve instances where individuals fail to report income from crypto sales or attempt to conceal their actual basis in cryptocurrencies.

Ficco also mentioned that the issue of crypto-related tax crimes is expected to persist and even escalate in the future. He noted an increase in tax-reporting offenses and predicted that the IRS would be initiating more charges throughout this year and beyond. Previously, IRS investigations primarily focused on broader cryptocurrency-related crimes like scams and embezzlement. However, with the increasing prevalence of cryptocurrencies, Ficco emphasized that they are likely to play a more significant role in various criminal activities such as phone scams, romance scams, and even pig butchering.

The IRS has been vigilant in reminding individuals about their obligation to report taxes on cryptocurrency transactions. Whether individuals have sold crypto, received it as payment, or engaged in any other form of crypto-related activity, they are required to comply with tax reporting regulations. Despite the presence of such rules dating back to at least 2014, there continues to be a high rate of non-compliance with tax reporting obligations, as highlighted in a report by Divly in 2023.

The enforcement efforts surrounding crypto-related tax issues are projected to intensify, starting this year. This development was signaled by the IRS’s recent recruitment of two specialized experts dedicated to overseeing crypto-related matters. Additionally, reports from CNBC indicate that tax professionals are bracing themselves for a substantial increase in scrutiny from the IRS. Ficco’s predecessor, Jim Lee, also underscored the increased focus on tax issues within the realm of cryptocurrencies, revealing that a significant portion of the IRS’s ongoing crypto investigations in 2023 revolved around tax-related concerns.

The rise of tax crimes linked to cryptocurrencies is a growing concern that requires heightened attention and enforcement efforts from regulatory authorities like the IRS. As the use and popularity of cryptocurrencies continue to expand, it is imperative for individuals involved in crypto transactions to ensure full compliance with tax reporting regulations to avoid potential legal repercussions.

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