The Criminal Investigation (CI) Unit of the United States Internal Revenue Service (IRS) has reported a notable increase in investigations related to digital asset reporting.
In its annual report, released on December 4, the IRS’s investigative branch disclosed that it initiated over 2,676 cases in the 2023 fiscal year, uncovering more than $37 billion linked to tax and financial crimes. A significant factor in these investigations has been the increased use of digital assets, leading to a corresponding rise in tax-related inquiries.
The CI Unit’s investigations have primarily focused on unreported income stemming from various cryptocurrency-related activities. These include failure to report capital gains from cryptocurrency sales, income generated from mining cryptocurrency, and earnings received in cryptocurrency forms, such as wages, rental income, and gambling winnings. Additionally, the unit has observed instances where taxpayers attempt to evade payments by not disclosing their cryptocurrency holdings, thereby concealing their assets.
The IRS began mandating U.S. taxpayers to explicitly report digital asset transactions in 2019, a requirement that has been consistently included in tax forms in subsequent years. CI chief Jim Lee acknowledged that while most cryptocurrency usage is for legitimate purposes, digital assets also pose risks for financing terrorism, ransomware attacks, and other illegal activities.
Since intensifying its focus on cryptocurrency-related crimes in 2015, the IRS has seized over $10 billion in digital assets. To further combat tax evasion, the agency has proposed new regulations for brokers, aiming to enhance reporting requirements and reduce instances of tax evasion related to digital assets.
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