The IRS Sets Its Sights on Bitcoin and Crypto Traders as Digital Currencies Take Center Stage
The U.S. Internal Revenue Service (IRS) is ramping up its efforts to address the digital assets industry and the tax implications that come with it. To prepare for the collection of crypto taxes, the IRS has recently hired Sulolit “Raj” Mukherjee and Seth Wilks, industry veterans who will serve as executive advisers for the agency.
Mukherjee, formerly the global head of tax at blockchain software company ConsenSys, brings valuable expertise to the IRS. Meanwhile, Wilks, who previously served as vice president of government relations at crypto tax software firm TaxBit, will also contribute his extensive knowledge to support the agency’s efforts.
Doug O’Donnell, IRS Deputy Commissioner, Services and Enforcement, highlights the importance of these new recruits in helping the agency navigate the digital assets sector, which has become a top priority for the IRS.
“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.”
An Anticipated Wave of Crypto Tax Scrutiny
Experts in the field have been eagerly awaiting an increase in enforcement activity when it comes to crypto tax reporting. James Creech, attorney and senior manager at accounting firm Baker Tilly, states that until now, crypto tax reporting has been inconsistent.
The U.S. Government Accountability Office has reported a significant decline in audit rates by the IRS between 2010 and 2019 for all income levels. This decrease can be attributed to reduced staffing resulting from decreased funding.
However, the IRS has been actively working to reverse historically low audit rates for high earners, corporations, and complex partnerships.
The IRS Takes on the Challenge of Tracking Digital Asset Trails
In its 2023 annual report, the IRS Criminal Investigation unit acknowledges the challenges posed by “chain-hopping and token swapping” but remains committed to tracking the public’s digital asset trail. The agency recognizes the potential for responsible financial innovation through digital assets but is also aware of the risks they pose, including money laundering, cybercrime, ransomware, narcotics, human trafficking, terrorism, proliferation financing, and tax crimes.
Hot Take: The IRS Cracks Down on Crypto Tax Compliance
The IRS is stepping up its efforts to address tax implications in the digital assets industry. With the hiring of industry veterans as executive advisers, the agency aims to improve its understanding of the sector and design effective systems for reporting cryptocurrency and digital assets transactions.
This move comes as experts anticipate increased enforcement activity in crypto tax reporting. While audit rates have declined in recent years due to reduced staffing, the IRS has been focused on reversing historically low audit rates for high earners and complex partnerships.
Tracking the public’s digital asset trail presents a challenge for the IRS due to techniques like chain-hopping and token swapping. However, the agency remains committed to mitigating illicit finance and identifying national security risks associated with digital assets.
The post IRS Targeting Bitcoin and Crypto Traders As Digital Currencies Become Top Priority For Agency: Report appeared first on The Daily Hodl.
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