As cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) become more popular and widely adopted around the world as a valid alternative to traditional assets, countries are looking for ways to regulate and tax the new asset class as well. like punishing those who avoid paying their dues.
One of the agencies that has embarked on the mission to crack down on crypto non-taxpayers is the United States Internal Revenue Service (IRS). In fact, the IRS launched ‘Operation Hidden Treasure’ to crack down on criminals who fail to report their crypto income, according to the Tax Law Offices of David W. Klasing Press release of June 16.
Specifically, Operation Hidden Treasure, which aims to bring to justice taxpayers who attempt to omit their crypto income on their tax returns, was announced by IRS Fraud Bureau Director Damon Rowe at the Federal Association of Lawyers on March 5, 2021.
To achieve the goals of the initiative, the IRS has assembled a task force comprised of experts in tracking various types of crypto income, as well as joining forces between the IRS’s civil and criminal departments for enforcement against cryptocurrency. crypto tax fraud.
Investigating Different Crypto Tax Evasion Methods
According to the press release, one of the methods of crypto tax evasion that the task force intends to address is structuring – conducting recurring financial transactions under $10,000 to circumvent tax reporting requirements.
Other tax evaders may use shell corporations to keep their crypto income secret, as they can help hide the identity of a business owner, allowing them to engage in various types of financial criminal activity without discovering the responsible party.
Finally, Operation Hidden Treasure will also investigate crypto blockchain cloaking technology, as some crypto exchanges allow contributors to trade items or other digital assets without revealing their identities. The investigation is expected to provide more options for tracking unreported crypto income through anonymous transactions.
The IRS interest in cryptocurrencies
It is worth noting that the IRS recently turned its attention to cryptocurrencies, introducing a slight change to the cryptocurrency-related question on tax returns, which now states:
“At any time during 2021, did you receive, sell, trade, or dispose of any financial interest in any virtual currency?”
The change was introduced ahead of the tax filing season that closed on April 18, according to Finbold.