2021-03-09 06:53:53

US IRS Loosens Cryptocurrency Reporting Requirements But Strengthens Enforcement Efforts

In a previous post, we explained how the U.S. Internal Revenue Service had introduced a question on the 2020 tax form that asked whether “at any time during 2020 did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency.” The purpose of placing this question in a very prominent part of the tax form was to try to collect some of the significant amounts of the unreported taxes surrounding crypto-currency transactions because, under U.S tax law, virtual currency is treated as property for Federal income tax purposes. In a FAQ posted to the IRS website on March 6, 2021, the IRS clarified that there is no need to answer that question affirmatively if the only thing a taxpayer did in 2020 was buy cryptocurrency with fiat.

At the same time, Forbes reported that, at a March 5, 2021 Federal Bar Association presentation on fraud enforcement priorities, Damon Rowe, the Director of the Office of Fraud Enforcement at the Internal Revenue Service, announced that the office had a new dedicated team of IRS Criminal Investigation professionals who are working on “Operation Hidden Treasure.” As Forbes explained, Operation Hidden Treasure “is comprised of agents who are trained in cryptocurrency and virtual currency tracking, and who are focused on taxpayers who omit cryptocurrency income from their tax returns. . . . [it] is a partnership between the civil office of fraud enforcement and the criminal investigation unit to root out tax evasion from cryptocurrency owners.”

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