The United States Internal Revenue Service (IRS) is piling up cases that are related to cryptocurrencies and intends to make them public in the future.
The tax regulator perceives that there are many investors and entrepreneurs who receive their income in digital currencies and refuse to report them officially, thereby evading tax on such incomes.
Some other cases involve crypto-to-fiat ‘off-ramping’ transactions where digital currencies are exchanged for fiat currency.
The IRS is piling up cases that are related to cryptocurrencies and intends to make them public in the future areas like “off-ramping” transactions, in which digital assets are exchanged for fiat currency, IRS Criminal Investigation Chief Jim Lee said during a press call.
“In the last three years I’ve really seen a shift” in digital asset investigations, Lee said. Previously, most were related to money laundering, he said, but tax cases now make up about half the mix,” Chief Jim Lee said
Such default on the part of investors contributed to the ‘John Doe’ summon enforced by the United States for the Southern District of New York on certain banks whose customers fail to report their crypto earnings. New York M.Y Safra Bank was summoned in connection to its customers who were utilizing the cryptocurrency prime broker SFOX.
IRS Expects Crypto Investors to Pay Taxes
According to the IRS ruling against M.Y Safra Bank at that time, the new York-based financial institution provided customers of SFOX with cash deposit accounts which they leveraged to buy and sell digital assets from the crypto trading platform. The U.S attorney in charge of the Southern District Damian Williams emphasized the need for crypto investors to pay taxes.
“Taxpayers are required to truthfully report their tax liabilities on their returns, and liabilities that arise from cryptocurrency transactions are not exempt. The government is committed to using all of the tools at its disposal, including John Doe summonses, to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share,” Williams stated
For now, the tax regulator is in the process of modifying its rules and regulations for the next tax season. In this modification, it is considering replacing ‘Virtual Assets’ with ‘Digital Assets’ so that it covers Non-fungible tokens (NFTs). Also, the criminal investigation arm of the IRS aims to hire up to 500 employees in preparation for the 2023 Fiscal year.