The IRS’s criminal division identified “dozens” of potential cryptocurrency tax evaders or cybercriminals after a meeting this week with tax authorities from four other countries.
Officials from the U.S., U.K., Australia, Canada and the Netherlands — known as the Joint Chiefs of Global Tax Enforcement — shared data, tools and tax enforcement strategies to find new leads in a quest to mitigate cross-border money-laundering, tax evasion and cybercrime.
The IRS’s cybercrime unit has developed expertise in “who is moving the money and where it’s going,” Ryan Korner, a senior special agent in the IRS’s Criminal Investigations office in Los Angeles, said in a call with reporters Friday. “We have tools in place that we didn’t have six months or a year ago.”
The effort is part of the Internal Revenue Service’s renewed focus on fighting tax evasion tied to cryptocurrency as digital currency has become more popular and gained in value. The agency has struggled in recent years to enforce tax laws and keep up with criminals as technology has advanced.
“Tax fraud is not a new crime, but the sophistication with which criminals commit tax fraud has significantly increased through cyber-related activities in recent years,” the joint chiefs said in a statement. “Data breaches, intrusions, takeovers and compromises are the new tools that criminals use to commit tax crimes.”
The IRS is preparing for a new wave of cryptocurrency audits. The agency sent letters to more than 10,000 people earlier this year, warning that they might be subject to penalties for skirting taxes on their virtual investments.
The IRS and its partners are using data from previous enforcement activities to find new criminals, Korner said. Using the data from the five countries gives them a broader view of how accounts, money and people are connected.
“That data doesn’t go and sit. We use that data,” Korner said.
The IRS released guidance last month telling virtual currency investors and their tax advisers how the agency expects them to report income from their holdings. The guidance is the first since 2014 and comes as tax auditors are increasingly focusing on examining individuals with cryptocurrency investments.
Until the recent guidance, investors and their tax advisers had to make educated guesses about how to report income and pay taxes from virtual-currency transactions. Some taxpayers didn’t report their transactions at all.