The IRS is cracking down on taxpayers committing tax crimes involving cryptocurrency, according to the criminal investigation chief, Guy Ficco. Ficco told CNBC on April 12 that there has been an increase in “pure crypto tax crimes” falling under Title 26 of the US Code, which includes federal income tax violations.
These pure tax crimes involve individuals failing to report income from crypto sales and concealing their actual basis in cryptocurrency. Ficco noted that the issue is expected to persist, with an uptick in tax-reporting crimes anticipated. The IRS is likely to bring forward more charges related to these issues in the coming year and beyond.
While IRS investigations into crypto have historically been part of broader probes into crimes such as scams and embezzlement, Ficco acknowledged that cryptocurrency is becoming more prevalent and will play a larger role in various types of crimes. However, he emphasized that crypto scams are distinct from tax-reporting crimes.
Ficco’s remarks follow a recent IRS reminder that individuals must report taxes if they have sold crypto, received crypto as payment, or engaged in other transactions involving cryptocurrency. Despite tax reporting rules for crypto investors being in place since at least 2014, reports indicate that many investors are still failing to report their crypto-related income.
A 2023 report from Divly revealed that only 1.62% of US investors paid taxes on their crypto holdings as required, just above the global average of 0.53%. To increase enforcement efforts around crypto, the IRS recently hired two experts specializing in cryptocurrency. Tax professionals are reportedly gearing up for increased scrutiny, with Ficco’s predecessor also highlighting a heightened focus on tax issues related to cryptocurrency in late 2023.
With the IRS ramping up efforts to tackle tax crimes involving cryptocurrency, the current trend seems to be pointing towards stricter enforcement in the near future.
