04/12/23

US: Crypto tax evasion cases are on the rise

As published on: blockworks.co, Monday 4 December, 2023.

The Internal Revenue Service’s Criminal Investigations Unit is seeing an increase in its caseload of crypto tax cases, according to Bloomberg.

Bloomberg cited a reporter’s call with division head Jim Lee, during which he disclosed that the investigations range from failures to report capital gains to purposeful withholdings of crypto ownership disclosures.

Three years ago, Lee reportedly said the majority of cases were focused on money laundering. Now, roughly half are tax related.

The tax agency’s investigations unit was just one of the agencies aiding in the Binance probe, which led to a $4 billion settlement.

Read more: Here are the details of Binance and Changpeng Zhao’s plea deal

As part of the settlement, Binance not only agreed to pay the billion-dollar sum but the exchange also pleaded guilty to the failure to comply with registration requirements and operating as an unlicensed money transmitting business.

Former CEO Changpeng Zhao pleaded guilty to violating anti-money laundering violations. He has, as part of the settlement, resigned from his role as CEO and faces a February sentencing.

The company still faces a lawsuit from the US Securities and Exchange Commission alleging that it commingled funds and offered unregistered securities.

“Our team of investigators uncovered that Binance disregarded anti-money laundering [know-your-customer] laws, failed to register as a money transmitter, and willfully violated US sanctions tied to the International Emergency Economic Powers Act,” Lee said in November following the settlement announcement.

Aside from the investigations, the IRS is currently working out its crypto framework. In October, it extended its tax rule comment period following lots of public feedback. Coinbase weighed in on the proposed rules, with its head of tax criticizing the proposed rules.

“The proposed regulations, as written, would impose an incomprehensible and unduly burdensome set of new reporting requirements,” Coinbase’s Lawrence Zlatkin wrote at the time.

Lawmakers on Capitol Hill pushed the agency to speed up its crypto tax rules, which were first introduced back in August.

Tags

Crypto tax Tax evasion IRS US