IRS Rolls Out ‘Operation Hidden Treasure’ to Find Crypto Evators Creating Tax Fraud
The United States Internal Revenue Service (IRS) is looking to enforce cryptocurrency tax compliance with its recent initiative.
“Operation Hidden Treasure” Is Not A Fun Game
The IRS will be coming down hard on those who under-report their crypto gains in their tax forms, Forbes reports.
Damon Rowe, Director of the Office of Fraud Enforcement, mentioned the agency’s intentions while speaking at a virtual tax conference organized by the Federal Bar Association (FBA).
The tax agency says that the program will be named ‘Operation Hidden Treasure’ with the sole purpose of weeding out American crypto tax evaders. The program will see the IRS’ civil office of fraud and its criminal investigative unit working together to bring the tax evasion menace under control.
IRS agents will be specially trained in blockchain technology to stamp out tax evasion among cryptocurrency investors. The tax agency’s employees are also undergoing training with the European Union Agency for Law Enforcement (Europol) as part of the program.
Following the announcement, crypto experts have given their predictions on the category of crypto investors the IRS might be after. Roger Brown, head of tax and regulatory affairs at crypto tax compliance firm Lukka, said the IRS is raising the stakes in enforcing its crypto compliance program.
To him, the IRS will be targeting crypto owners who use crypto privacy-coins like Monero to conceal their digital trail while trading digital assets. Blockchain technology has opened a new and improved financial system for investors globally.
Due to their anonymous nature, it was hard for regulators like the IRS to trace transactions and link them to investors. However, new initiatives and tools from blockchain analytics firms like Chainalysis have made this easy.
Shehan Chandrasekara, head of tax strategy at crypto accounting firm CoinTracker, says the IRS may uncover a goldmine as it will be looking into past transactions done in the crypto space.
IRS Collaborating With Private Crypto Contractors And Vendors
Carolyn Schenck, national fraud counsel in the IRS Office of Chief Counsel, said the tax agency is closely working with private contractors and vendors in the blockchain space to track down signatures that show fraudulent activities.
The agency will be looking out for transactions structured below the reporting requirements (like transfer of $10,000 multiple times), using offshore shell companies to hide funds, as well as making quick transactions on and off the blockchain.
The IRS has been ambiguous on what it considers taxable crypto events and non-taxable transactions. In a FAQ page released in the past week, the tax agency addressed issues taxpayers were having concerning its Form 1040.
The tax regulator had explained that virtual assets bought with fiat currencies in 2020 were non-taxable. But asset swaps, conversion back to fiat will be considered a taxable event.