IRS To Announces “Hundreds” Of Cases Involving Cryptocurrency Tax Cheats

( The criminal investigation division of the Internal Revenue Service is preparing to ramp up its efforts to shut down the illicit activities of tax evaders who use cryptocurrency to hide their money.

A Bloomberg Tax report recently said that the IRS is putting this heavy focus into practice for the next tax season, which will begin shortly after the New Year.

Jim Lee, the chief of the IRS criminal investigation division, said they are currently building “hundreds” of cryptocurrency cases, and many of those will soon be released to the public.

The agency in the past has focused investigations on incidents such as money laundering. In recent years, though, tax cases have experienced a major jump. Today, they represent roughly half of all the agency’s investigations.

As Lee explained:

“In the last three years, I’ve really seen a shift” in these investigations that are focused on digital assets.

Lee further explained that the main focus in digital asset cases include some things such as “off-ramping” of transactions. This happens when people exchange their digital assets for fiat currency. It can also occur when people are paid in cryptocurrency for work they do, and then they don’t report that on their income taxes.

Last year, the IRS created a new Office of Cyber and Forensic Services as a way to combine efforts of the agency’s physical forensics, digital forensics, digital asset investigation and cybercrime investigation units. The idea was to have all of them working together under one umbrella so they could be more effective in their aim.

Lee has said that the IRS is now able to track any cryptocurrency transaction that takes place — despite most cryptocurrency saying it’s completely anonymous.

Late last week, the IRS’ Criminal Investigation division released its annual report, in which it detailed many successes in cryptocurrency investigations. One of the main cases happened in March of 2022, when Samuel Mendez and Bruce Bise, the founders of Bitqyck, were sentenced for crimes of tax evasion.

Year-to-date, the IRS says the 2,077 special agents who reside in the division have dedicated almost 70% of their total time to investigating crimes related to taxes, such as tax fraud and tax evasion. The remainder of their time was spent on investigating drug trafficking and money laundering cases.

For fiscal year 2022, the IRS reported that all of its criminal investigations led to them seizing approximately $7 billion worth of cryptocurrencies. Lee said that amount was double what the IRS seized just the year before.

The new focus on cryptocurrency is forcing agents to become more familiar with the Web3 world. Yet, Lee said most of the field agents are very comfortable doing so, and are fully prepared to perform all their duties.

As he said recently:

“We’ve been doing it for more than 100 years, and we’ve followed criminals into the dark web and now into the metaverse.”

This focus on increasing criminal investigations in cryptocurrency comes at a time when the agency has created a new “Digital Assets” category for tax reporting, which will include stablecoins, cryptocurrencies and non-fungible tokens — all of which must be reported.