The US Internal Revenue Service (IRS) has created a new team of 10 investigators who will focus on international crimes and building cases against tax evaders who use cryptocurrencies to cheat the taxman.
According to a report by Bloomberg, the IRS said that the anonymity of trading digital currencies has made it an attractive market for people trying to cheat the tax system.
Don Fort, chief of the IRS Criminal Investigation Division, said in an interview with Bloomberg:
“It’s possible to use Bitcoin and other cryptocurrencies in the same fashion as foreign bank accounts to facilitate tax evasion,”
Forst said that the team’s current focus will be assessing how cryptocurrency users convert their fiat money into crypto and then back. “We know that you want to get your money out at some point,” he said.
The IRS has had its on eye on cryptocurrency traders for a while now. The agency requested records on over 500,000 users of the cryptocurrency exchange Coinbase as part of an effort to catch those cheating the tax system.
A cryptocurrency exchange is where traders buy and sell cryptocurrencies. You can buy them using either cryptocurrencies, fiat currencies (dollars, euros, etc.), or other digital assets. A fiat currency or fiat money is money that the government legally declares as legal currency.
Last November, a judge in San Francisco ruled that Coinbase must hand over information on accounts with trading activity of at least $20,000, this translated to only 14,000 “high volume” users – a 97% reduction of the agency’s original records request of information on 500,000 users. She cited data showing that only 800 to 900 U.S. taxpayers reported gains on their bitcoin returns between 2013 and 2015.
“That more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of Bitcoin in a given year suggests that many Coinbase users may not be reporting their Bitcoin gains,” U.S. Magistrate Judge Jacqueline Scott Corley wrote. “The IRS has a legitimate interest in investigating these taxpayers.”
Video – What are cryptocurrencies?
Cryptocurrencies are a type of electronic (online) currency that exist without a central bank regulating them. The most famous cryptocurrency today is Bitcoin. This Market Business News (MBN) video explains using simple terms and examples what cryptocurrencies are.