The Internal Revenue Service (IRS) of the United States is expanding its global reach to investigate tax and financial crimes involving cryptocurrency. The agency will send cyber agents to Australia, Colombia, Singapore, and Germany for a 120-day pilot starting in June 6. If successful, the agents will stay in their respective countries to advise U.S. case agents on obtaining evidence and assist with cultural and legal considerations.
Jared Koopman, Director of Cyber and Forensic Services at the IRS, said, “We’re not just talking about the United States, we’re talking about the entire world now.” The agency currently has eleven agents stationed in different countries, and the new cohort will help focus on tax evasion in 2023.
The IRS uses technology developed by blockchain security firm AnChain.ai to scrutinize crypto tax disclosures and investigate white-collar crime. The agency is set to receive an $80 billion federal injection for enforcement actions, including crypto tax evasion.
In September last year, the IRS issued a John Doe summons to M.Y. Safra Bank, requesting transaction information for one of its crypto clients SFOX. It sought to determine whether the brokerage’s clients complied with disclosure rules.
The new Infrastructure Bill will force crypto brokers to disclose clients’ identity and transaction activity from 2024. Brokers must issue form 1099-B to clients from 2024, which will track crypto transactions from Jan. 1.
This move by the IRS to investigate crypto tax crimes globally will have a significant impact on the crypto sector. It sends a strong message to those who believe they can use crypto to evade taxes that they will be caught. The increased scrutiny will likely lead to greater transparency in the sector, which could attract more mainstream investors. However, there are concerns that the move could stifle innovation in the crypto space, as companies may be hesitant to develop new technologies for fear of running afoul of the law. Moreover, the IRS’s increased focus on crypto tax evasion may lead to overregulation, which could hamper the growth of the sector.
It remains to be seen how effective the IRS’s global crackdown on crypto tax crimes will be. However, it is clear that the agency is determined to use all available resources to ensure that those who use crypto to evade taxes are held accountable.