The Internal Revenue Service is drawing attention to cryptocurrencies and their propensity to be used for evading taxes. Last week, the tax authority published its 2019 Criminal Investigation Report, where it celebrated a century of its existence and expressed further commitment to apprehend people who try to find ways to work around taxes. In the report, the IRS shed light on some of the progress that it has made with enforcing its duties, as it noted that implementing its duties has become more difficult thanks to the increase in globalization and technological advancement.
Curbing International Tax Evaders
Speaking on international tax compliance, IRS Deputy Director Jim Lee alluded to the Global Tax Enforcement, or J5, which was necessitated by a call from the Organization for Economic Cooperation and Development (OECD) to fight against international tax evasion.
On some of the most prevalent international tax evasion techniques, Lee clarified, “Today’s cybercriminals think we cannot catch them, but as evidenced by some of the great casework in this report, I would say they are wrong. They now deal in crypto-currency, again thinking this will make them anonymous, but our agents have once again proved that there is nowhere to hide. We will not stop in our pursuit.”
In a display of progress, the IRS gave examples of several instances where criminals and money launderers who use Bitcoin to circumvent taxes have been apprehended, with some of the most notable criminal busts of 2019 mentioned en suite.
Let me simplify the IRS's position on crypto in the United States.
1. Every trade, altcoin or otherwise, is a taxable transaction.
2. Every time you earn BTC it is taxable.
3. Every time you SPEND BTC it is taxable as a sale of Bitcoin.
They view BTC as property, not money.
— The Wolf Of All Streets (@scottmelker) November 19, 2019
Concluding, the report showed that while there seems to be an upsurge in the incidence of crypto-assisted tax evasion methods, the IRS and other investigative organizations are ready to keep these criminals on the run and are fully equipped to dispense their duties.
Big Wins for the IRS In 2019
Although cryptocurrencies are still engaged in the fight for adoption and classification in the global financial ecosystem, one area where considerable success was made this year has been in tax enforcement. A few months back, the IRS released tax guidance on cryptocurrencies, effectively providing investors and traders with a list of events and instances where taxes will need to be remitted.
While several loopholes were eventually discovered in the document and its provision, it did cover the basics of crypto-related transactions, and has been viewed as a significant step in the right direction nonetheless.
Enforcement, however, hasn’t been so smooth. Cryptocurrencies are private by nature, and getting information about complex transactions can be tough. The IRS ran in so some legal snag recently, when it was ordered to reduce the scope of its investigations into William Zietzke, a man who the agency suspects could be trying to take out a significant chunk of his owed taxes.
Still, there has been some progress made so far, and it should be celebrated. There have been more levels of growth in the ability of law enforcement agencies to track down criminals and money launderers, and the only way to go from here is up.