The IRS’s civil enforcement efforts on cryptocurrency transactions have been found lacking, characterized as “mostly indirect and negligible,” according to a report from the Treasury Inspector General for Tax Administration. This assessment calls for the agency to enhance its compliance strategies to align with the significant increase in virtual currencies and transactions.
The report emphasizes that while the IRS Criminal Investigation division has been more proactive, utilizing advanced analytics tools and collaborating with blockchain analytics firms to pursue noncompliant taxpayers, broader agency initiatives are needed. Between 2018 and 2023, this division investigated 390 cases involving cryptocurrency.
To address the rising challenge effectively, the Inspector General recommends that the IRS develop a comprehensive, agency-wide compliance plan. This would help optimize enforcement efforts and ensure more robust collection of tax dollars associated with cryptocurrency transactions.
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