Chief of the IRS Criminal Division is on the Hunt for Cryptocurrency Scofflaws

In March of 2014, the Internal Revenue Service issued  an FAQ on digital currencies and the tax treatment of transactions in crypto like Bitcoin. In brief, the IRS said that virtual currency should be treated as property for U.S. federal tax purposes. “General tax principles that apply to property transactions apply to transactions using virtual currency.” But since that time, the IRS has not been super vocal in its pursuit of cryptocurrency traders and any potential gains of which they are not reported to the tax officials.

This past week, in a write up by Bloomberg, it became clear the taxman is on the hunt for scofflaws and money launderers that are transacting in crypto.

“It’s possible to use Bitcoin and other cryptocurrencies in the same fashion as foreign bank accounts to facilitate tax evasion,”  said Don Fort, Chief of the IRS Criminal Investigation Division.

Last month, it was reported that Fort listed virtual currencies was on the top of his list regarding tax avoidance. Apparently Fort has put together a team of ten cryptocurrency experts to sniff out individuals that attempt to dodge paying their taxes. As the market cap of Bitcoin and many other cryptucurrencies have jumped, the IRS sees virtual currencies less as a novelty and more important.

But even though the Feds have labeled crypto property that does not necessarily make figuring out your tax liability easy. Extreme volatility means price gyrations that can be hard to track – especially if the trading is between different digital currencies across multiple exchanges.


Late last year, Coinbase was compelled to hand over information on about 14,000 accounts. This first shot across the bow is an example of what is to come. But in the end, the IRS still has thinly stretched resources and most crypto traders will attempt to comply and the Feds will be on the prowl for the biggest tax evaders.

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