After recounting the activities of the fiscal year 2022 (FY22) which started in October 2021 and ended in September 2022, the United States Internal Revenue Service (IRS) through its Criminal Investigation Division (IRS-CI) Chief Jim Lee announced that it building up hundreds of crypto cases that will soon be made public as it steps into the 2023 fiscal year (FY23).
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In its FY22 recount, the tax regulator mentioned several crypto-related cases that its criminal division was able to contain including the arrest of Ilya Lichtenstein and his wife, Heather Morgan in connection to the Bitfinex case which involved billions of dollars in Bitcoin (BTC).
According to the report, 2,077 special agents spent 70% of their time investigating tax-related crimes like tax evasion and tax fraud during FY22, while nearly 30% of their time was spent on money laundering and drug trafficking cases. Other cases were linked to wire fraud and money laundering.
More Crypto-related Tax Cases Spring up
“Our team follows the money. We’ve been doing it for more than 100 years, and we’ve followed criminals into the dark web and now into the metaverse. Tax and other financial crimes know no borders. If you violate the law and end up in the crosshairs of an IRS-CI special agent, you are likely going to jail,” said IRS-CI Chief Jim Lee.
There were scenarios where investors were involved in ‘off-ramping’ transactions, attempting to exchange cryptocurrencies for fiat currency, and for others who basically earn in crypto, they fail to report their earnings in a bid to evade tax. Lee acknowledged that most of these crimes are now tax-oriented than ever.
Already, IRS organized the Office of Cyber and Forensic Services in 2021 to provide support efforts to its digital asset investigation, cybercrime investigation, digital forensics, and physical forensics. The IRS-CI Chief is positive that these teams are able to deliver on their assignment of tracing and reporting any crypto transactions.
Meanwhile, the tax regulator has attempted to modify the rules for digital assets ahead of FY23. Specifically, the IRS has given a broader definition for taxpayers, the tax regulator replaced “Virtual Assets” with “Digital Assets” which now recognizes Non-fungible tokens (NFTs) and virtual currencies.
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