Surge in Crypto Tax Evasion Cases Signals IRS Crackdown

The Internal Revenue Service’s Criminal Investigations Unit is reportedly grappling with a surge in crypto-related tax evasion cases, as disclosed by division chief Jim Lee in a recent call with reporters.

The investigations span a spectrum, ranging from failures to report capital gains to deliberate withholding of crypto ownership disclosures.

Three years ago, the focus of the IRS investigations unit predominantly centered on money laundering cases related to cryptocurrencies. However, the current landscape reveals a substantial shift, with nearly half of the cases now being tax-related. This trend underscores an evolving emphasis on ensuring compliance in the realm of cryptocurrency taxation.

The IRS investigations unit played a pivotal role in the recent Binance probe, which resulted in a historic $4 billion settlement. Binance not only committed to the billion-dollar payment but also admitted guilt to failing compliance with registration requirements and operating as an unlicensed money transmitting business. Former CEO Changpeng Zhao pleaded guilty to anti-money laundering violations and resigned from his role as part of the settlement.

Despite the settlement, Binance is not out of the legal woods. The company faces a lawsuit from the US Securities and Exchange Commission, alleging fund commingling and the offering of unregistered securities. The outcome of these legal battles will continue to shape the regulatory landscape for cryptocurrency exchanges.

Beyond individual cases, the IRS is actively working on establishing a comprehensive crypto framework. The agency extended its tax rule comment period in October after receiving substantial public feedback. Coinbase, a major player in the crypto space, criticized the proposed rules for introducing an “incomprehensible and unduly burdensome” set of reporting requirements. Lawmakers on Capitol Hill are urging the IRS to expedite the formulation of crypto tax rules, initially introduced in August, underscoring the urgency in addressing regulatory clarity in the crypto tax landscape.

* Original content written by Coinlive. Coinbold is licensed to distribute this content by Coinlive.