The IRS section probed failures to disclose crypto holdings and report capital gains for transactions in the fiscal year 2023 report. The United States Internal Revenue Service (IRS) Criminal Investigation (CI) Unit reported an increase in the number of investigations involving digital asset reporting. According to the IRS investigative arm’s annual report released on Dec. 4, it initiated more than 2,676 cases, identifying more than $37 billion in tax and financial crimes. As a result of increased use of digital assets, tax investigations related to digital assets have increased, according to the team.
“These investigations consist of unreported income resulting from failure to report capital gains from the sale of cryptocurrency, income earned from mining cryptocurrency, or income received in the form of cryptocurrency, such as wages, rental income, and gambling winnings,” according to the Criminal Investigations Unit. “CI is also seeing evasion of payment violations, where the taxpayer fails to disclose ownership of cryptocurrency in an attempt to shield holdings.” Beginning in 2019, the IRS began requiring US taxpayers to report specifically on digital asset transactions — a question that has been added to tax forms in each succeeding year. According to the survey, “most people using cryptocurrency do so for legitimate purposes,” but digital assets offer a risk for financing terrorism, ransomware attacks, and other illegal activity.
In 2016, the IRS seized more than $10 billion in digital assets. Since 2015, it increased its efforts to investigate crimes involving cryptocurrency. A new regulation on broker reporting requirements has been proposed by the government body to reduce tax evasion.