A leaked IRS Powerpoint presentation shows how the Inland Revenue Service plans to track down those who don’t pay tax on their cryptocurrency activities. The document, which has to be in contention for worst designed PDF of the century, breaks down cryptocurrencies in some detail before discussing how the office will go about tracking down those who don’t pay taxes on their earnings, focussing mainly on Bitcoin, with an underlying message of “we’re coming for you”. The news comes just two days after it was revealed that the IRS is planning to create new Bitcoin tax rules.
I recently got hold of a presentation given to special agents in the IRS Criminal Investigation division that discussed investigating taxpayers who hold crypto.
I went through all of the 181 horribly formatted slides (attached for reference haha) and here’s what I learned… pic.twitter.com/YQqHVR5Dv7
— Crypto Tax Girl (@CryptoTaxGirl) July 8, 2019
Change in Tactics from IRS
Once cryptocurrencies, ICOs, mining, and more are discussed, attention turns to what most cryptocurrency traders and hodlers will want to know about – how the IRS plans to keep tabs on them. The first mention of this reveals and interesting change in tack compared to the usual method of requesting data from exchanges:
…one method that should be considered is serving Grand Jury Subpoenas to a variety of companies. Issuance of a Grand Jury Subpoena should be considered for Apple, Google, and Microsoft for the Subject’s complete application download history. Each application’s function should be explored to determine whether or not the application can transmit, or otherwise allow, transactions in bitcoin.
Following this, the IRS will conduct research to see if anyone in the subject’s social circle are involved in cryptocurrency or work within a field that could possibly be of some use to someone wanting to hide their cryptocurrency use, such as a bank teller. Importantly, they also state that notifying the subject of any investigation would be “detrimental to the seizure of any bitcoin balance”, so you’ll likely have no idea they’re doing it. Alongside this, the IRS will also consider subpoenaing for bank, credit card, and PayPal details to see if any are related to cryptocurrency purchases or receipts. Retailers that accept Bitcoin, such as Amazon payments, may also be subpoenaed, but the IRS admits that “this method may not reliably yield results.”
Tightening the Net
Once the IRS knows you are involved in Bitcoin in any way they will begin work in obtaining your Bitcoin balance by trying to track down your addresses, once more using social media as a guide to matching individuals with addresses. Subpoenas may then also be requested from any exchanges that suspect the individual to have used, although, as the IRS states, “The reliability of this method, both in record retention and non‐notification of the customer, has yet to be extensively tested.”
Don’t Risk It
The overarching message of the document is that the IRS is stepping up its game, which is not good news for anyone who has not paid their dues. There are of course ways round the system, but those of us who want to retire off cryptocurrency will likely have a hard time explaining how they suddenly came by their two lambos and million-dollar mansion. The answer is simple – no one likes paying tax, but the alternative is a life of hiding and always looking over your shoulder. Just write some of your earnings off and enjoy what’s left.
There is a ton of other information in there about crypto in general, tracing transactions via the blockchain, limitations of the blockchain, etc. but what you need to know is that the IRS is working HARD to identify criminal tax cases involving cryptocurrency.
— Crypto Tax Girl (@CryptoTaxGirl) July 8, 2019
