Crypto investors know that one of the great things about crypto investing is that it's a secure and hack-proof transaction. But many investors—often wrongly—believe that cryptocurrency transactions are anonymous and untraceable. Therefore, they assume they don't have to report crypto revenue to the Internal Revenue Service (IRS). However, the truth is cryptocurrency is traceable, and the IRS can (and- increasingly- it does) go after crypto owners for failing to report their crypto income.
A NEW APPROACH FOR IRS CRYPTO INVESTIGATION
One important thing to be aware of: the IRS starts from an almost default position that crypto holders may be using cryptocurrency to hide or launder real-world assets, or they're using crypto exchanges (e.g., moving from one crypto blockchain to another) to evade IRS reporting requirements.
Since that's the case, the IRS's Office of Fraud Enforcement (OFE) is now collaborating with the IRS's Criminal Investigation Division to make sure OFE agents are as adept in tracking crypto as their criminal division counterparts.
“OPERATION HIDDEN TREASURE”
The IRS' search for unreported crypto— known in the agency as “Operation Hidden Treasure”—means OFE will “equip all agents with the necessary tools to detect, trace, and uncover digital assets,” explained IRS National Fraud Counsel Carolyn Schenck in a recent webinar.
She explained that the IRS is training agents to conduct cryptocurrency investigations, along with getting those agents the cutting-edge tools they need to track crypto successfully. She also stated that the IRS expects to continue issuing “John Doe” subpoenas to crypto exchanges, to identify unreported assets and exchanges. And investigators will be looking at both ends of the transaction—examining the senders and the receivers.
NEW ASSETS STILL NEED EXPERIENCED TAX COUNSEL
Cryptocurrency investigation is a rapidly expanding field for IRS enforcement, so the dangers of failing to report crypto holdings continue to increase. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602)-200-7399 or contact him online to discuss your options.