The IRS is ramping up its investigations into the use of digital assets.
According to a recent report from the Internal Revenue Service (IRS), the agency has seen an increase in the number of Digital Asset Tax Enforcement (DATE) programs. The DATE program was created to “identify, address, and pursue potential civil and criminal tax violations involving digital assets.”
The IRS reports that the number of DATE civil audits has increased significantly over the past few years, with nearly 1,000 such audits being opened in 2020 alone. The IRS notes that it has also identified over 200 potential criminal cases of tax evasion related to digital assets.
In addition to civil and criminal cases, the IRS has also seen an increase in the number of voluntary compliance initiatives involving digital assets. This includes voluntary disclosures of previously undisclosed activities as well as the participation in pilot programs such as the Offshore Voluntary Disclosure Program and the Foreign Account Tax Compliance Act.
The IRS has also noted that it is working with other federal law enforcement partners, such as the US Department of Justice, to investigate and prosecute tax crimes related to digital assets.
As the use of digital assets continues to increase, the IRS is stepping up its enforcement efforts to ensure that taxpayers and financial institutions are complying with federal tax laws. Taxpayers who have not properly disclosed their digital asset transactions may be subject to substantial financial penalties.
