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The IRS Criminal Investigation Division Braces for a Surge of Criminal Charges in Crypto Tax Cases – This Year and Going Forward by SANDRA R. BROWN, EVAN DAVIS & PHILIPP BEHRENDT

In a recent interview with CNBC at the Chainalysis Links event in New York, Guy Ficco, a Chief of the IRS Criminal Investigation Division (IRS-CI), issued a stark warning: the IRS is gearing up to tackle a significant increase in cases of tax fraud and evasion related to cryptocurrency transactions.

Ficco’s words carry weight, especially in the ever-evolving landscape of cryptocurrency tax regulation and enforcement. He emphasized that the IRS has observed a noticeable surge in what he termed “pure crypto tax crimes” (so-called Title 26 cases) and is no longer only part of non-tax scams such as fraud and embezzling. Ficco anticipates this trend to continue in the foreseeable future. These Title 26 crimes encompass a range of activities, from failing to report income generated from crypto sales to deliberately concealing the true basis of cryptocurrency holdings.

This could be purely not reporting income generated from crypto sales, it could be hiding the true basis of crypto, or shielding the true basis in crypto. So, that is an area where we’ve seen an uptick and I anticipate we’re going to see more of and there is going to be more charged title 26 crypto cases here, in this year and going forward.” Guy Ficco (Chief of IRS CI)

The implications are clear: the IRS is not only focused on the growing prevalence of crypto-related tax offenses but is also taking proactive measures to address them head-on. Ficco also underlines that the agency has forged public private partnerships with leading blockchain analysis firms like Chainalysis, along with other law enforcement agencies. These collaborations aim to enhance the IRS’s capabilities in tracing and identifying illicit financial activities within the cryptocurrency ecosystem.

Ficco highlighted the expertise of IRS special agents in tracking financial transactions while at the same time acknowledging the unique challenges posed by the decentralized and pseudonymous nature of cryptocurrencies. To bridge this gap, the IRS is leveraging the specialized tools and knowledge offered by firms like Chainalysis, which are instrumental in the IRS’s unraveling complex crypto transactions and uncovering illicit activities.

What does this mean for crypto investors and enthusiasts? Firstly, it underscores the importance of complying with tax obligations related to cryptocurrency transactions. The IRS is ramping up its efforts to detect and prosecute individuals who flout tax laws, whether through ignorance or deliberate evasion. Ignoring these obligations could lead to severe penalties, including fines, penalties, and even criminal charges.

Moreover, the IRS’s heightened scrutiny serves as a reminder of the evolving regulatory landscape surrounding cryptocurrencies. As governments around the world grapple with how to regulate this burgeoning asset class, individuals and businesses operating in the crypto space must stay informed and adapt to changing compliance requirements. This includes maintaining accurate records of crypto transactions, reporting income from crypto-related activities, and seeking professional guidance when necessary.

For those who may have previously neglected their tax obligations related to cryptocurrency, Ficco’s statements serve as an important wake-up call. The IRS is not only actively pursuing current violations but also casting a retrospective eye on past non-compliance. Individuals who have failed to report crypto income or provided inaccurate information on their tax returns may find themselves facing increased scrutiny and potential legal consequences.

In conclusion, Ficco’s remarks paint a clear picture: the IRS is bracing for a surge in crypto tax crimes and is prepared to take decisive action to enforce tax compliance within the cryptocurrency ecosystem. As the regulatory landscape continues to evolve, it’s imperative for crypto investors and enthusiasts to stay informed, comply with tax obligations, and seek professional guidance to navigate this complex terrain. Failure to do so could result in serious repercussions, both financial and legal.

This is a fierce warning to taxpayer that the time of leniency is over and erroneous tax reporting will be criminally charged. We recently blogged on the first purely tax related crypto charges in the case against a Texas man.

Our firm specializes in advising clients on proactive measures to mitigate criminal exposure while also providing expert representation in criminal cases.

Employing many of the same tools as the IRS, such as Chainalysis, blockchain explorer and others, to assist in not only staying abreast but ahead of the information available to the IRS, so that we can effectively advocate for our clients’ interests and address any challenges that may arise in the process.

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