Introduction
The IRS has intensified its focus on cryptocurrency tax compliance, targeting both serious and casual investors who have failed to report their crypto transactions. With a stronger grasp of digital assets, the IRS is actively investigating unreported gains, potential tax fraud, and non-compliance.
If you own or trade cryptocurrency, it’s essential to understand the risks of non-compliance and the importance of accurate reporting.
Increased IRS Scrutiny on Crypto Transactions
Initially, authorities were focused on fraudulent Initial Coin Offerings (ICOs) and money laundering. However, the IRS has now expanded its enforcement strategy to routine crypto tax audits and investigations.
IRS Confirms Readiness to Pursue Crypto Tax Evasion Cases
Gary Alford, a cyber-crime coordinator at the IRS, recently emphasized that the agency is now fully prepared to investigate and prosecute crypto tax evasion.
At a recent panel, Alford stated:
“We believe we are at the point now where we can bring cases for criminal prosecution. If we had 12 jurors and told them someone made all their money in Bitcoin, we believe they would understand.”
This statement underscores the IRS’s confidence in pursuing legal action against crypto tax evaders.
How the IRS Treats Cryptocurrency for Tax Purposes
-
The IRS classifies cryptocurrency as property, similar to stocks.
-
Any sale, trade, or use of crypto (including purchases using crypto debit cards) may trigger capital gains or losses.
-
Taxpayers must report all crypto transactions, including airdrops, staking rewards, mining income, and conversions between digital assets.
Despite these requirements, many cryptocurrency holders have failed to report their transactions, increasing the risk of IRS scrutiny.
The IRS’s Approach to Crypto Audits and Investigations
IRS Access to Crypto Transaction Data
The IRS has increased its data collection efforts, using third-party reports from exchanges, blockchain analysis tools, and subpoenas to track unreported crypto activity.
Voluntary Disclosure Encouraged
The IRS urges taxpayers to voluntarily disclose unreported crypto transactions, offering reduced penalties and a more favorable resolution for those who come forward before being contacted.
Ignoring tax obligations can result in:
-
Audits and legal investigations
-
Substantial penalties and interest on unpaid taxes
-
Potential criminal charges in severe cases
Conclusion
The IRS is actively targeting crypto tax non-compliance, making it essential for investors, traders, and businesses to ensure they have accurately reported their digital asset transactions.
Block3 Finance provides expert assistance in cryptocurrency tax compliance, helping you navigate IRS regulations and avoid penalties. Stay proactive and ensure your crypto taxes are in order.
If you have any questions or require further assistance, our team at Block3 Finance can help you.
Please contact us by email at inquiry@block3finance.com or by phone at 1-877-804-1888 to schedule a FREE initial consultation appointment.
You may also visit our website (www.block3finance.com) to learn more about the range of crypto services we offer to startups, DAOs, and established businesses.