IRS Targeting Bitcoin and Crypto Traders As Digital Currencies Become Top Priority For Agency: Report
The U.S. Internal Revenue Service (IRS) is gearing up for a new campaign to tackle the digital assets industry and the tax implications that come with it.
To prepare for collecting crypto tax, the IRS recently hired industry veterans Sulolit “Raj” Mukherjee and Seth Wilks to serve as executive advisers for the agency.
Mukherjee previously worked as global head of tax at blockchain software company ConsenSys and served as an executive at the US arm of crypto exchange Binance while Wilks previously served as vice president of government relations at crypto tax software firm TaxBit.
Doug O’Donnell, IRS Deputy Commissioner, Services and Enforcement, says that the two new recruits will help the agency understand the sector, which is now a “top IRS priority.”
“Seth and Raj expand our ability to understand this sector while designing systems for reporting of cryptocurrency and digital assets and related transactions. Improving employee capacity and access to tools in this rapidly evolving global landscape is a top IRS priority.”
According to James Creech, attorney and senior manager at accounting firm Baker Tilly, “everybody’s been waiting for the tidal wave of this enforcement activity” when it comes to crypto. He says that up until now, crypto tax reporting has been “very hodgepodge.”
The U.S. Government Accountability Office reports that the IRS’ audit rates have declined drastically for all income levels between 2010 and 2019, from 0.9% and 0.25%, largely because of reduced staffing as a result of decreased funding.
CNBC reports that the IRS has focused on reversing the historically low audit rates of high earners, corporations and complex partnerships.
In its 2023 annual report, the IRS Criminal Investigation unit says despite “chain-hopping and token swapping,” the agency is still working on tracking the public’s digital asset trail.
“We continue to lead the way in our investigative efforts involving digital assets, and we are reaping the benefits of early investment in our cyber capabilities and training. Our partnerships with the private sector created opportunities for us to solve the most complex crypto-related crimes in the world. We remain focused on stopping those who attempt to exploit new technology for nefarious purposes, mitigating illicit finance, and identifying national security risks.
We know that digital assets provide opportunities for responsible financial innovation, and most people using cryptocurrency do so for legitimate purposes. But, we also know that digital assets pose a risk of facilitating money laundering, cybercrime and ransomware, narcotics, human trafficking, terrorism, proliferation financing, and tax crimes. Chain-hopping and token swapping have become common digital assets techniques used to make following the digital money trail more difficult, but not impossible.”
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