As cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) become more popular and widely adopted around the world as a valid alternative to traditional assets, countries are seeking ways to regulate and tax the new asset class, as well as punish those who avoid paying their dues.
One of the agencies that have embarked on the mission to bring down the crypto non-taxpayers is the United States Internal Revenue Service (IRS). Indeed, the IRS has launched ‘Operation Hidden Treasure’ to crack down on the offenders that don’t report their crypto income, according to the Tax Law Offices of David W. Klasing press release on June 16.
Specifically, Operation Hidden Treasure, which aims to bring to justice taxpayers trying to omit their crypto income on their tax returns, was announced by the IRS Director of the Office of Fraud, Damon Rowe, at the Federal Bar Association on March 5, 2021.
To achieve the initiative’s goals, the IRS has assembled a task force consisting of experts in tracking various kinds of crypto income, in addition to joining the forces between the civil and criminal departments of the IRS for Crypto Tax Fraud Enforcement.
Investigating different methods of crypto tax evasion
According to the press release, one of the methods of crypto tax evasion that the task force aims to address is structuring – carrying out recurrent financial transactions below $10,000 to circumvent tax reporting requirements.
Other tax evaders may use shell corporations to keep secret their crypto income as they can help hide the identity of a company’s owner, enabling them to engage in various sorts of financial crime activities without uncovering the responsible party.
Finally, Operation Hidden Treasure will also investigate crypto blockchain cloaking technology, as some crypto exchanges allow taxpayers to trade for items or other digital assets without revealing their identities. The investigation is expected to provide more options for tracking down unreported crypto income through anonymous transactions.
IRS’s interest in cryptocurrencies
It is worth noting that the IRS has recently turned its gaze to crypto, introducing a slight change to the crypto-related question in income tax returns, which now states:
“At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”
The change was introduced before the tax filing season that closed on April 18, as Finbold reported.