The Internal Revenue Service (IRS) Criminal Investigation (CI) Division has reported a notable uptick in the number of inquiries focused on digital asset reporting, as highlighted in its recently released annual report on December 4.
Over the fiscal year 2023, the CI Division disclosed the opening of more than 2,676 cases, unveiling approximately $37 billion in tax and financial crimes. One significant observation made by the investigative team was the escalating utilization of digital assets, which subsequently led to a surge in investigations related to tax issues associated with these assets.
The investigations encompass various areas such as unreported income arising from the failure to disclose capital gains linked to cryptocurrency sales, income generated through cryptocurrency mining activities, and earnings received in the form of digital currencies like wages, rental income, and gambling winnings, as cited by the CI's investigative unit. Additionally, the CI flagged instances of payment evasion, where taxpayers deliberately concealed their ownership of cryptocurrency to shield their assets.
From 2019 onward, the IRS has mandated U.S. taxpayers to explicitly report digital asset transactions, an obligation that has consistently been integrated into tax forms in subsequent years. Jim Lee, CI's head, acknowledged in the report that although most individuals use cryptocurrencies for legitimate purposes, these digital assets carry inherent risks, including their involvement in financing terrorism, ransomware attacks, and other illicit activities.
Since intensifying its scrutiny of crimes related to cryptocurrencies in 2015, the IRS has seized an estimated $10 billion in digital assets. Furthermore, the governmental agency has put forward new regulations concerning broker reporting requirements as a strategic measure to diminish instances of tax evasion associated with digital assets.
