Through an audit of the IRS, the Treasury Inspector General for Tax Administration (TIGTA) found that despite the IRS Criminal Investigation unit investigating 390 cases and recommending 224 for prosecution between 2018 and 2023, the prevalence of virtual currency noncompliance is profound. According to the TIGTA, virtual currency use has increased 420% between April 2020 and July 2023, and the anonymity of these assets causes the IRS to struggle to ensure taxpayers are in compliance. Since virtual currency investments and transactions often do not include the taxpayer’s name, the IRS is largely unable to ascertain who owes the taxes, causing the IRS to rely largely on self-reporting by taxpayers.
To curb this noncompliance, the IRS created “Operation Hidden Treasure,” where both criminal and civil divisions focus on identifying individuals who are not in compliance with virtual currency reporting. While this program has mainly focused on training and establishing methods for identifying these taxpayers, the recent passage of the Infrastructure Investment and Jobs Act, and subsequent creation of a new information form by the IRS, institute more ways these taxpayers can be identified.
To read the full memorandum or the TIGTA’s recommendations, click here.
