Internal Revenue Service is focusing on tax evasion done with virtual currencies like Bitcoin and nonfungible tokens. This is done by using data analytics to uncover transactions that crypto users assumed are hidden. As crypto and other virtual currencies have become more main stream investors are not the only ones interested then, the IRS is also an interested party. IRS has even added a check box to individual tax returns, where the taxpayer needs to indicate if the bought, sold or traded virtual or crypto currency.
According to IRS Commissioner Chuck Rettig, IRS is leveraging data analytics technology and artificial intelligence to assist its overburdened staff, especially at a time when the IRS has been facing employee shortages.
The crypto world has been changing rapidly, and the IRS has been leveraging technology to keep up with it. Eric Hylton, who was recently commissioner of the IRS’s Small Business/Self-Employed division and previously spent over 20 years at IRS Criminal Investigation, told Accounting Today, “Quite a bit of attention has been associated with it. It’s being reported on the 1040, trying to give insight as to how widely cryptocurrency has been adopted. From a compliance standpoint, I think IRS CI has done a great job in really addressing cryptocurrency as it relates to the dark web, but also in moving further in working with a number of firms to really address the potential issue of tax evasion.”
The IRS is using new approaches, including greater computing capacity and artificial intelligence, analyze and trace digital transactions in the real world. With more ability to trace these transactions we can count on more audit recovery by the government of unreported taxes and more criminal cases.