The IRS criminal investigation chief, Guy Ficco, recently highlighted a concerning trend in tax crimes involving cryptocurrency. According to Ficco, there has been a surge in what he calls “pure crypto tax crimes” falling under Title 26 of the US Code, specifically federal income tax violations. These crimes range from failing to report income from crypto sales to concealing one’s actual basis in cryptocurrency.
Persistent Issue and Future Projections
Ficco emphasized that this issue is likely to persist, with an observed uptick in tax-reporting crimes. He anticipates that the IRS will bring forth more charges related to crypto tax crimes in the coming year and beyond. Previously, IRS investigations into cryptocurrency have been part of broader probes into scams and embezzlement involving digital assets.
Expanding Influence and Relationship to Broader Crimes
As cryptocurrency becomes more pervasive, Ficco noted that it will play a larger role in broader crimes, such as phone scams, romance scams, and even pig butchering. These crimes differ from pure tax crimes but illustrate the expanding influence of cryptocurrency in illegal activities.
The IRS has been proactive in reminding individuals of their tax obligations related to cryptocurrency transactions. However, past data indicates that reporting failures remain high, with a minority of investors complying with tax reporting rules. To address this issue, the IRS has ramped up its enforcement efforts, hiring experts specifically focused on crypto investigations. Tax professionals are bracing for what CNBC describes as a “tidal wave” of scrutiny around cryptocurrency transactions.
Ficco’s predecessor, Jim Lee, also signaled an increased focus on tax-related matters in the realm of cryptocurrency. In December 2023, Lee revealed that half of the active crypto investigations at the time involved tax issues. This suggests that the IRS is prioritizing the crackdown on tax crimes involving cryptocurrency in the foreseeable future.
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