Recently, the IRS criminal investigation chief, Guy Ficco, shared alarming statistics with CNBC regarding the rise of tax crimes involving cryptocurrency. Ficco pointed out that there has been a noticeable increase in what he refers to as “pure crypto tax crimes” falling under Title 26 of the US Code, specifically federal income tax violations. These crimes primarily revolve around individuals failing to report income from crypto sales and concealing their actual basis in cryptocurrency.
According to Ficco, the trend of tax-reporting crimes in the cryptocurrency space is expected to persist. The IRS has witnessed an uptick in such violations and anticipates bringing forth more charges in the upcoming years. It is concerning to note that until recently, IRS investigations into crypto-related crimes were usually part of broader probes involving scams and embezzlement. However, with the increasing pervasiveness of cryptocurrency, it is likely to play a more significant role in a wide array of criminal activities.
The IRS has been vigilant in reminding individuals of their tax obligations concerning cryptocurrency transactions. Failure to report taxes on crypto sales, receipts, or other transactions could result in severe consequences. Despite the IRS introducing tax reporting rules for crypto investors as far back as 2014, statistics indicate a high rate of non-compliance. Reports suggest that a mere 1.62% of investors in the US paid taxes on crypto as mandated, only slightly higher than the global average of 0.53%.
IRS enforcement efforts surrounding cryptocurrency are expected to intensify this year. The agency recently recruited two experts specifically tasked with focusing on crypto-related matters. Additionally, tax professionals are bracing themselves for what CNBC describes as a “tidal wave” of scrutiny from the IRS. Ficco’s predecessor, Jim Lee, also highlighted an increased emphasis on tax issues in late 2023, revealing that half of the ongoing crypto investigations at that time were related to tax matters.
The surge in crypto tax crimes is a cause for concern for the IRS. It underscores the importance of taxpayers diligently fulfilling their tax obligations in the rapidly evolving landscape of cryptocurrency. Failure to comply with tax regulations could lead to legal repercussions and penalties, making it crucial for individuals engaged in crypto transactions to stay informed and compliant with the law.
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