IRS Expects to See Spike in Crypto Tax Evasion Cases in the US: Report

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The United States, where estimates suggest that 40 percent of adults currently hold crypto assets, is expected to see an increase in cases of tax evasion. The US Internal Revenue Service (IRS) is already preparing to handle these cases. The information was revealed by Guy Ficco, the head of research for the IRS in the US. Ficco was speaking at the Chainalysis Links event in New York. According to the IRS official, the agency has already seen an increase in the number of “pure cryptocurrency tax crimes,” which are separate from cases of fraud, money laundering, and scams.

The United States reportedly levies taxes ranging from zero to 20% on long-term capital gains. Entities that earned up to $44,626 (roughly Rs. 37.2 lakh) in profits from crypto activities in 2023 will not have to pay any long-term capital gains tax. Short-term capital gains, however, are taxed at up to 37 percent, depending on the profits accumulated in the US.

US citizens who knowingly lie about their crypto profits while reporting taxes are charged under Title 26 tax code in the US. The IRS is currently trying to identify and crack down on this category of people.

“This could be simply not reporting the revenue generated from crypto sales, it could be hiding the true basis in crypto. So this is an area where we have seen an increase and I anticipate there will be more cases of title crypto 26 loaded this year and into the future,” Ficco told CNBC in an interview.

Arming itself to deal with this expected increase in crypto tax evasion cases, the US IRS is already forging partnerships with different law enforcement divisions to improve the criminal identification process.

In addition, the IRS has also partnered with Chainalysis, a blockchain analytics company. With the help of Chainalysis, the US IRS seeks to understand gaps in Web3 protocols or configurations that cybercriminals could exploit to achieve this.

As the US prepares to deal with crypto tax evaders, in 2023 Divly, a technology research company based in Sweden, reported shocking details about cases of international tax evasion. The research platform, at the time, had claimed that only 0.53 percent of global cryptocurrency holders paid taxes on their crypto income by 2022.

According to the Divly report, at the time, the Philippines had the lowest percentage of crypto taxpayers at just 0.03 percent. India had ranked third in this index with only 0.07 percent of cryptocurrency holders having paid their crypto taxes.

In India, where all crypto profits are taxed at 30 percent, crypto players are integrating tax services into their platforms so that their users can calculate the amount and pay the government. The Indian Web3 community believes that if it shows discipline and consistency in adhering to government laws, the authorities could be more responsive to their needs and provide stronger support for the growth of the sector.

In July last year, Taxnodes, a crypto-tax company, announced that it would offer free NFTs to people who paid their crypto-taxes through their platform.



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