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IRS Criminal Investigation Unit Says Crypto Tax Investigations Surged in 2023

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The U.S. Internal Revenue Service’s (IRS) criminal investigation unit says crypto tax investigations are on the rise.

The unit notes in a new annual report that the number of digital asset tax investigations have grown as crypto assets have become more mainstream.

“These investigations consist of unreported income resulting from failure to report capital gains from the sale of cryptocurrency, income earned from mining cryptocurrency, or income received in the form of cryptocurrency, such as wages, rental income, and gambling winnings.

[Criminal investigation] is also seeing evasion of payment violations, where the taxpayer fails to disclose ownership of cryptocurrency in an attempt to shield holdings.”

Jim Lee, the chief of the IRS’s criminal investigation unit, says the law enforcement agency is “reaping the benefits” of investments in cyber capabilities and training.

“Our partnerships with the private sector created opportunities for us to solve the most complex crypto related crimes in the world. We remain focused on stopping those who attempt to exploit new technology for nefarious purposes, mitigating illicit finance, and identifying national security risks.

We know that digital assets provide opportunities for responsible financial innovation, and most people using cryptocurrency do so for legitimate purposes.

But, we also know that digital assets pose a risk of facilitating money laundering, cybercrime and ransomware, narcotics, human trafficking, terrorism, proliferation financing, and tax crimes.”

Lee notes that chain-hopping has made tracking digital assets more difficult.

Chain-hopping is a form of money laundering where one type of crypto asset is converted to another type and funds are moved across multiple chains, according to the U.S. Department of Justice (DOJ).

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Author: Conor Devitt

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