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The IRS is Targeting Crypto Coin Tax Evasion with “Operation Hidden Treasure”

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    With the ever-rising popularity of cryptocurrencies in today’s world, it is expected that the Internal Revenue Service (IRS) would implement new rules to keep up with the proliferation of virtual currencies. Operation Hidden Treasure is a recent effort by the IRS to crack down on taxpayers who are not fulfilling their tax compliance obligations when it comes to cryptocurrency reporting.

    If you are concerned about possible criminal charges in relation to your non reporting of cryptocurrency income, call The Tax Law Offices of David W. Klasing. Our tax professionals can provide information about the measures the IRS is taking with Operation Hidden Treasure and how to get back into compliance without facing criminal tax prosecution.

    How the IRS Operation Hidden Treasure Targets Crypto Coin Tax Evasion

    As is implied by the name of the initiative, Operation Hidden Treasure targets taxpayers who attempt to hide their cryptocurrency income from the IRS. Operation Hidden Treasure was announced by Damon Rowe, the Director of the Office of Fraud at the IRS, at a meeting at the Federal Bar Association that took place on March 5th, 2021.

    According to Damon Rowe, Operation Hidden Treasure is an effort that targets cryptocurrency holders who omit this form of income on their tax return. The IRS put together a task force that is trained in the tracking of various types of crypto income and has also tied together the civil and criminal branches of the IRS for Crypto Tax Fraud Enforcement.

    The IRS hopes to tackle methods of crypto tax evasion that may be used to hide crypto coins, such as structuring. Structuring is when a person will perform frequent financial transactions at less than $10,000 to evade certain cash tax reporting requirements. For example, making multiple transactions of $9,999 or splitting the payments evenly across dozens of transactions may evade cash reporting rules.

    The use of Shell Corporations to hide cryptocurrency gains is another prong of Operation Hidden Treasure’s investigations. In many cases, a shell corporation could be used to attempt to hide the identity of the owner of a company. This would make it easier for the company to engage in money laundering or other similar crimes as there is no person to hold responsible for the crime.

    The use of Crypto Blockchain Cloaking Technology is also being investigated by the IRS. Some cryptocurrency exchanges enable a taxpayer to trade for items or other crypto coins anonymously. The IRS expects its investigation will yield additional options on how to track down taxpayers utilizing anonymous transactions to evade reporting cryptocurrency taxable income. 

    For advice on how to get back into compliance with reporting multiple years of unreported cryptocurrency income without facing criminal prosecution, talk to our dually licensed California Crypto Tax Attorneys and CPAs.

    How to Handle Unreported Crypto Coin to Avoid Tax Evasion Criminal Charges

    The general message that the IRS wants to convey to taxpayers with Operation Hidden Treasure is that, if necessary, they will find a way to detect your unreported cryptocurrency income and prosecute you for failure to report your crypto coins. Whether the unreported income was intentional, or a mistake is difficult to prove and the larger the amount of unreported income the less likely the IRS will be to believe your noncompliance was non willful or unintentional.

    The IRS has a program called a voluntary disclosure that comes with a nearly guaranteed pass on criminal tax prosecution if the terms of the program are strictly complied with by the taxpayer.

    Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-reported income on Cryptocurrency coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply. 

    It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

    Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

    As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!

    If you are concerned about reporting cryptocurrency to the IRS, consider the following tips that could help your situation.

    Avoid Talking to an Accountant

    Many taxpayers have the false belief that a business relationship with an accountant is privileged. Information about financial crimes reported to an accountant is not confidential because there is no accountant-client privilege. This means that an accountant could be forced to provide the government with evidence of your tax evasion. In some circumstances, the government may even coerce an accountant to testify against you in a criminal case. They also have a conflict of interest with you where they may be tempted to throw you under the bus to protect their own reputation.

    Instead of hiring an accountant to fix your crypto noncompliance, you would be wise to work with a dually licensed California Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing. Only a law firm can offer you attorney-client privilege when it comes to relaying incriminating information about possible willful crypto coin tax reporting violations. As a result, you will be able to speak freely about all the cryptocurrency issues you are facing without worry that information will be leaked to the IRS or used against you in a court of law.

    Maintain Communication with the IRS

    If you own cryptocurrency and you have received a message from the IRS about your cryptocurrency holdings, ignoring this message is the last action that you want to take. Avoiding interaction with the IRS could lead to a tax audit or other serious consequences. However, do not communicate with the IRS without consulting qualified legal counsel with a dually licensed Cryptocurrency Tax Attorney and CPA.

    After receiving any type of communication from the IRS regarding your tax situation, you would be wise to bring this information to your legal team. The Tax Law Offices of David W. Klasing could help you develop a legal strategy to deal with unreported cryptocurrency income. Let us help you get ahead of stiff civil and criminal penalties that is being pursued by the IRS through Operation Hidden Treasure. Again, we can effectively remove the risk of criminal tax prosecution provided you are willing to knock on the IRS’s door before they come a knocking on yours.

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    Contact Us if You Are Worried About the IRS Targeting Crypto Coins in Operation Hidden Treasure

    If you are engaged in the investing or trading of cryptocurrency, and you want to know the details of Operation Hidden Treasure, contact our tax professionals today. The Tax Law Offices of David W. Klasing has worked on an extensive variety of cryptocurrency tax issues that commonly affect taxpayers. To make an appointment for a consultation, contact us at (800) 681-1295 or schedule ONLINE here.

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