IRS to transition from ‘education to enforcement,’ says former division chief

IRS to transition from ‘education to enforcement,’ says former division chief

A former top investigator is warning that “a high-stakes game of chicken” between the Internal Revenue Service (IRS) and cryptocurrency holders who fail to properly report their earnings will be entering a new phase in 2021 as the tax collection agency begins to focus on pursuing “civil and, potentially, criminal penalties.”

In an article co-authored by Don Fort today, the former chief of the Internal Revenue Service’s (IRS) criminal investigation division said that while the agency until now has focused its resources on informing the public of proper reporting guidelines, it will now be turning to more stringent “enforcement.”

“The IRS has been not-so-quietly positioning itself for a smooth transition from education to enforcement in 2021 and beyond.”

The article notes that the trail starts with Coinbase, who answered a “John Doe” summons in 2018 and handed over account information on nearly 13,000 users — information which could soon lead to crackdowns. For instance, the article mentions the request the IRS made to Luxembourg-based exchange Bitstamp for information on one American user.

The focus on crypto holders is in part due to a widening “tax gap” — the rift between the total income from taxes that should be paid to the Treasury verses what it actually receives — a disconnect in which Fort and his co-author Lawrence Sannicandro believe crypto holders could be playing a major part.

“As of Dec. 10, with Bitcoin fresh off new record highs, the market capitalization of cryptocurrencies was $524 billion,” the article reads. “Assuming cryptocurrency-related tax liabilities of $25 billion and a 50% compliance rate, unreported cryptocurrency tax liabilities again account for around 3.2% of the $381 billion tax gap. Thus, it is likely that unreported taxable cryptocurrency transactions are contributing significantly to the tax gap.”

Ultimately, the article concludes that major trends — such as the addition of a question about cryptocurrency now prominently placed at the top of form 1040 — indicate that the IRS is gearing up for widespread efforts to root out underpayment.

“Even though the IRS has not yet announced many mainstream tax evasion or money laundering cases involving virtual currency, that trend should change in 2021.”

Moreover, crypto holders shouldn’t try to get cute when the tax man comes calling.

“History has shown that underestimating the government is a fool’s game.”

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 Jeannie Propes

Jeannie Propes– Technology My Name is Jeannie Propes, and I am 29 years old who is an industrialist other than a writer. I want to catch the attention of my audience and publishers without sound too dry and dull. I am the sort of person who adores his spare time by writing my thoughts and ideas for my audience or readers. My writing skills are not confined to any specific field, I wrote on many topics, but technology and stock Market articles are always my favorite. I love to express myself through creative modes such as drawing, singing, and writing. I love to spend my leisure time with my beloved cat, sleep or by playing my favorite video games.

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