Tax officials from the U.S, the U.K, Australia, Canada and the Netherlands, also known as the joint chiefs of Global Tax Enforcement held a meeting this week, where they shared tools, data and tax enforcement strategies in a bid to find new leads in the mitigation of cross-border tax evasion, cybercrime and money laundering.
The cybercrime unit of the IRS has new tools that are assisting them to know who is moving the money and to whom the money is being sent. This, combined with their expertise and the data provided by their counterparts, has enabled the IRS criminal division to identify potential cryptocurrency tax evaders in dozens.
Sophisticated Technology Enable Criminals Evade Tax
As technology advances, criminals also advance their tactics in committing and hiding their crimes, the agency has thus been recently finding it hard to enforce the tax laws. Now that Cryptocurrencies have become more popular and more valuable, the IRS is committed to fighting tax evasion linked with cryptocurrency.
Tax fraud has been around for years; however, criminals have significantly increased their level of sophistication when it comes to tax evasion by the use of more sophisticated technology. Among the new tools, criminals are using to commit tax crimes to include intrusions, data breaches, compromises, and takeovers.
Earlier this year, the IRS sent letters to about 10,000 people warning them of the penalties they might be subjected to for evading tax on their crypto investments. The chiefs armed with the data provided by their counterparts are looking for more cybercriminals. The data is broader now that it is obtained from five countries, making it easier to understand how the different accounts and people are connected.
Guidelines on how cryptocurrency investors are required to report their income to the agency were released last month. These guidelines come at a time when tax auditors have increased their focus on individuals with cryptocurrency investments.
Before the provision of these new guidelines, crypto investors have been reporting their income and paying taxes from their crypto transactions based on guesses.
New IRS Income Reporting Guidelines for Crypto Investors.
The guidance released by the agency is in the form of question and answer. According to the document, the IRS requires crypto investors to track their transactions to prove the amount they bought and thus determine what they owe when they sell.
The investor is also required to keep documents of coin transfers between two wallets to prove the transaction is tax-free to the IRS. Long-standing tax rules also apply in the guidelines such as assets held for less than a year are taxed higher short-term capital gains rate. Now that the guidelines have been provided, investors can now be compliant.