IRS, J5 Group Closing in on International Tax Fraud “Enablers”

In August 2018, our international tax attorneys published an article discussing the launch of a global anti-tax fraud group known as the Joint Chiefs of Global Tax Enforcement, or “J5.” Represented by the Internal Revenue Service Criminal Investigation Division (IRS-CI), the United States is one of five coalition members alongside tax authorities from Australia, Canada, the Netherlands, and the United Kingdom. The group was established in July 2018 “to increase collaboration in the fight against international and transnational tax crime and money laundering” – part of IRS-CI’s broader ongoing push toward increased enforcement of cryptocurrency tax regulations, such as rules for reporting capital gains from Bitcoin. Earlier this month, the J5 convened an international event in Amsterdam, challenging tech leaders to “identify, develop, and test tools, platforms, techniques, and methods that contribute to the mission of the J5.” For taxpayers (and financial institutions), that can only mean one thing: whether they use digital or fiat currency to commit tax evasion, the net is tightening for tax offenders around the world.

IRS Targets International Tax Evasion, Cryptocurrency at J5 “Challenge” Event

According to a press release issued July 2, 2018, “The [J5] alliance focuses on building international enforcement capacity by sharing information and intelligence… and conducting joint operations to bring those who enable and facilitate offshore tax crime to account.” By sharing vast quantities of data, and developing and implementing new technologies to conduct investigations, member countries hope to make the detection and prosecution of international tax fraud more efficient.

As IRS-CI Chief Don Fort explained, “We cannot continue to operate in the same ways we have in the past, siloing our information from the rest of the world while organized criminals and tax cheats manipulate the system and exploit vulnerabilities for their personal gain. The J5 aims to break down those walls, build upon individual best practices, and become an operational group that is forward-thinking and can pressurize the global criminal community in ways we could not achieve on our own.”

A J5-sponsored meeting in Amsterdam earlier this month signals progress for the alliance – and trouble ahead for noncompliant taxpayers. The J5 dubbed the event “The Challenge,” inviting “their leading data scientists, technology experts and investigators” to “find schemes, identify potential enablers, and propose actions to J5 leadership to address these threats.”

To accomplish these goals, investigators analyzed “data from a variety of open and investigative sources available to each country, including offshore account information.” Fort has emphasized that banks and financial companies – not just individual taxpayers – are expected to comply with the laws, noting that “the money… inevitably… leads you to many levels, many different individuals and many different facilitators” of tax evasion. While taxpayers might expect the IRS to exclusively target major organizations, even local community banks can be singled out and penalized if they condone, facilitate, or assist with fraud.

The J5 targets three core issues, according to the IRS website: transnational tax crime, money laundering, and cyber-crime. At the nexus of these issues – and at the focus of the J5’s efforts – is regulation of cryptocurrencies, such as Bitcoin (BTC), Litecoin (LTC), and Ethereum (ETH). As we discussed in a previous article, Bitcoin transactions can trigger federal requirements to report both capital gains and ordinary income. This includes offshore income, meaning some taxpayers with Bitcoin or other cryptocurrency may need to file an FBAR (and potentially, also Form 8938 (Statement of Specified Foreign Financial Assets)). IRS guidance on whether Bitcoin or Bitcoin wallets are reportable for purposes of FBAR and FATCA has been somewhat unclear, underscoring the importance of consulting with an experienced Bitcoin tax lawyer for personalized Bitcoin tax help.

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Bitcoin Tax Lawyers and Cryptocurrency CPAs

If you have offshore bank accounts, including offshore Bitcoin wallets, you may need to take some extra financial steps to ensure your compliance with federal tax laws. At the Tax Law Office of David W. Klasing, we are award-winning tax attorneys, CPAs, and EAs with extensive experience helping international taxpayers navigate the complicated, often confusing tax regulations around cryptocurrency. If you have questions about filing or paying taxes on Bitcoin, our skilled tax professionals are here to provide clarity. Contact us online to schedule a reduced-rate consultation or call the Tax Law Office of David W. Klasing at (800) 681-1295 today.

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