IRS Operation Hidden Treasure

IRS Operation Hidden Treasure Launched To Track Down Crypto

IRS Operation Hidden Treasure and What Crypto Owners Must Know: The enforcement US and International cryptocurrency tax and reporting compliance is on the rise — which includes recent Notice 2020-2 which promotes the reporting of offshore cryptocurrency. Doubling down on its promise to increase enforcement of cryptocurrency compliance, the IRS launched a new operation called “Operation Hidden Treasure.” With the development of J-5, issuance of soft letters 6173 and 6174, and several SEC and DOJ charges being filed for alleged crypto and bitcoin fraud and evasion — Operation Hidden Treasure is just the next step in cracking down on crypto tax crimes (in what will presumably be one several more crypto enforcement initiatives to come down the pipeline).

What is IRS Operation Hidden Treasure?

This program was developed to track cryptocurrency related transactions. Recently, the IRS let it be known that they had developed a new faction of the fraud investigation unit designed to enforce cryptocurrency related matters.

As reported by Coindesk:

• • • • The U.S. Internal Revenue Service (IRS) appears to be stepping up its enforcement capabilities with a new program dedicated to cryptocurrency tax compliance. 

      • With “Operation Hidden Treasure,” the IRS will search for unreported crypto-related income, according to Director of the Office of Fraud Enforcement Damon Rowe. 

        • Speaking at a Federal Bar Association virtual tax conference, Rowe said cryptocurrency fraud will be a priority. Forbes first reported the news. 

        • Operation Hidden Treasure, a joint effort between the IRS’ civil office of fraud enforcement and its criminal investigation unit, will train agents to look at blockchains to root out tax evasion among cryptocurrency users. It will exist as part of the office’s emerging threats mitigation team, Forbes said.

        • IRS employees are also reportedly training alongside the European Union Agency for Law Enforcement Cooperation (Europol) as part of the initiative. 

Carolyn Schenck, national fraud counsel in the IRS Office of Chief Counsel, told conference-goers the agency is working with private contractors and vendors, presumably blockchain analytics firms, to develop “signatures,” or telltale signs of fraudulent activity. 

• • • • These indicators include looking at those who structure transactions just below reporting requirements (like sending a series of $10,000 transactions), using shell corporations to hide funds as well as “getting on and off the chain,” Schenck reportedly said. 

      • The IRS has sent conflicting messages to U.S. crypto holders several times in the past. Most recently, an updated FAQ page indicated that investors who simply bought “virtual currency with real currency” would not have to report that transaction on this year’s tax returns. 

      • Still, cashing out crypto or making every-day purchases is typically seen as a taxable event. Operation Hidden Treasure is designed to find, trace, and attribute such transactions to taxpayers, Schenck said. 

“These transactions are not anonymous,” she said. “We see you.”

Crypto Enforcement is on the Rise

In conclusion, the Internal Revenue Service and U.S. government are working to uncover anonymous transactions involving cryptocurrency to ensure the transactions are properly taxed and reported by US taxpayers. In general, enforcement has increased significantly.

If you are out of compliance you may consider getting it to compliance.

About International Tax Law Firm

Golding & Golding specializes in IRS offshore disclosure including the disclosure of previously unreported cryptocurrency.

Contact our firm today for assistance.