The IRS Criminal Investigation Division (IRS-CI), which celebrated its hundredth anniversary this year, recently published the 2019 edition of its annual report on tax crimes, as our IRS tax attorneys wrote about earlier this month. The report revealed that in 2019, IRS-CI employed a total of 2,009 special agents, marking a slight 0.5% decrease from last year (when there were 2,019 special agents) and general low point for the Division’s numbers, which ebbed similarly during the 1970s. IRS-CI Chief Don Fort, who was appointed to the position in 2017, hopes to turn that around by hiring more special agents in the near future. As IRS-CI expands, one of its top priorities is to increase taxpayers’ compliance with cryptocurrency reporting requirements – and, as the IRS has already demonstrated by taking aggressive enforcement actions against crypto users and exchanges, that translates to real consequences for taxpayers, including penalties, auditing, and even criminal charges. If you are a cryptocurrency user, you need to be prepared for a Bitcoin tax evasion crackdown – which will likely only intensify as IRS-CI grows in size.
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According to the IRS-CI 2017 Annual Report, the Division employed 2,159 special agents that year. That number saw a precipitous drop in 2018, when it decreased by 140 employees, falling to just 2,019 special agents. While the decline from 2018 to 2019 was much smaller, with IRS-CI losing less than a dozen special agents, it marks a continued decline for the workforce.
Yet despite ebbing numbers, IRS-CI’s remaining special agents have maintained incredibly high conviction rates that, in 2019, exceeded 91%. (As we recently observed, government budget cuts have hindered – but by no means halted – successful tax enforcement efforts.)
All the same, it is a trend Don Fort would like to see reversed, as the IRS-CI Chief indicated in recent statements.
“I’m very hopeful we’ve reached the bottom in terms of staffing,” said Fort. “We end the year with 2,000 special agents, which puts us at 1970s levels.” However, looking to the near future, he added that IRS-CI is currently “in a hiring posture,” with “support for a number of years of robust hiring, to get the numbers back up.” Fort also stated he was “really excited about that, and hopeful it’s not a one-time event.”
As Fort acknowledged, low numbers have forced IRS-CI to prioritize its resources in recent years, which has translated to increased focus on certain areas deemed to be most productive for the government. “As we’ve been challenged in the manpower perspective for the last five to six years,” he explained, “we have used that time wisely. We’ve made investments in cyber, cyber investigations in tax and non-tax, working in data analytics with the Nationally Coordinated Investigations Unit.”
Those investments have paid off for the IRS – “With the investment in those areas, we’re seeing the fruits of our labor,” Fort remarked – but may cost some taxpayers dearly. The increased emphasis on Bitcoin tax compliance has placed tens of thousands of virtual currency users in the IRS’ crosshairs, with heightened risk of selection for a tax audit. Taxpayers should know that the IRS can track Bitcoin, despite misconceptions about anonymity and encryption.
If there are firm indicators that the taxpayer willfully concealed the account or wallet, the taxpayer may face criminal charges. Even if the noncompliance was accidental, the IRS may still impose costly civil penalties (plus interest charges), making proper reporting essential.
If you have a Bitcoin account or wallet, you should come forward now before it’s too late. By reporting Bitcoin transactions accurately, you may be able to avoid or minimize penalties (or prevent yourself from being prosecuted).
Work with the experienced Bitcoin tax attorneys at the Tax Law Office of David W. Klasing for trusted cryptocurrency tax help, including Bitcoin-related tax audit representation and criminal tax defense representation. Contact us online today to arrange a reduced-rate consultation, or call (800) 681-1295.
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