US IRS May Seize Cryptocurrency Worth Billions of Dollars In 2022, Top Agency Official Says
Nicholas Otieno Nov 22, 2021 04:40
The Internal Revenue Service (IRS) predicts that it would seize more billions of dollars worth of cryptocurrency next year, given the agency is set to get more funding for the government.
The Internal Revenue Service, a major US regulator, could seize cryptocurrencies valued at billions of dollars linked to tax fraud and other crimes in the forthcoming year. That is according to a key agency official.
IRS Criminal Investigation Chief Jim Lee talked about such development after making a press briefing with media reporters. He stated: “I expect a trend of crypto seizures to continue as we move forward into fiscal year ‘2022,’ We’re seeing crypto involved in a number of our crimes as we move forward.”
Lee made such comments following a publication of an IRS criminal investigation annual report on Thursday, November 18. According to the report, the IRS seized $3.5 billion worth of crypto assets during the fiscal year 2021, a figure that accounted for 93% of all the assets seized by tax enforcement during that year.
In 2020, the IRS’s criminal investigation unit seized $1.2 billion worth of crypto coins connected to cases concerning criminal activities like tax fraud, money laundering, wire fraud, and the distribution of illegal narcotics. That includes $1 billion stolen from the Silk Road; an online Bitcoin exchange shut down in 2013. The unit also prosecuted a former software developer at Microsoft Corporation who used crypto coins to hide $10 million he stole from the firm during that year.
Recently, Congress gave the IRS more powers to surveil crypto transactions in the infrastructure bill that President Joe Biden signed into law on Monday, November 15. The law will require “crypto brokers” to track and report transactions to the IRS in an effort to give tax authorities more visibility into cryptocurrency trades.
The IRS could also benefit from an additional $80 billion in funding that Democrats are proposing in Biden’s Build Back Better policy plan (a bill that aims to give Americans more support in many avenues of life – education, subsidized childcare and healthcare, lower taxes), which could get a vote in the House as soon as next week on Thursday. Lee stated that the money is desperately required in his unit to hire more than 250 to 300 special agents and invest in systems to identify and track cybercrimes.
What does the New Infrastructure Law mean for U.S. Crypto Investors?
As reported by Blockchain.News in August, the new infrastructure law might adversely impact the way consumers invest in cryptocurrencies like Bitcoin in the U.S.
On Monday, November 15, President Joe Biden signed the “Infrastructure Investment and Job Act”, popularly known as the “Infrastructure Bill.” The law allocates funding and other resources focused on public transportation, bridges, roads, water and sewage systems, power grids, ports, railways, cybersecurity and broadband internet, among other areas.
However, the law contains some new reporting requirements for cryptocurrency transactions that have little to do with infrastructure. That could have significant impacts on millions of U.S. consumers and businesses who have embraced cryptocurrency for its accessibility, transparency, and efficiency.
The new law requires “crypto brokers” to notify the IRS directly of cryptocurrency transactions. The law also requires anyone who receives more than $10,000 in digital assets to report their personal information to the IRS within 15 days by filling out Form 8300.
Meanwhile, Patrick McHenry (R-North Carolina) and Tim Ryan (D-Ohio)-led U.S. lawmakers introduced a bipartisan bill on Thursdays, November 19, seeking to modify a cryptocurrency tax provision in President Biden’s newly passed infrastructure act.
The bipartisan bill aims to clarify the definition of a “crypto broker”, as spelt out in the Infrastructure Investment and Jobs act.
Lawmakers and crypto advocates have been different groups about how broadly or narrowly to define the term, determining how companies falling in the crypto industry should report crypto transactions to the IRS.
The current language’s ambiguity in the new legislation has been a point of contention.
The infrastructure act defines a broker as “any person who is responsible for regularly providing any service involving transferring of digital assets on behalf of another person.”
But that means that even software developers and crypto miners would be subject to reporting customers’ information even when they have no way of collecting that data.
In turn, the new law will create tax reporting challenges for many crypto investors who use their own crypto wallets for daily transactions and trading.
Therefore, crypto investors need to stay on the right side of the new law concerning their investments. They should keep track of their cost basis (what they are paid for their cryptocurrencies) as accurately as possible to reconcile with what crypto exchanges will be reporting to the IRS. They also need to find an experienced crypto tax professional to assist in accurately reporting their crypto investments.
Image source: Shutterstock