Tech
IRS Predicts Spike in Crypto Tax Evasion Cases in US: Report
The United States, where estimates suggest 40% of adults currently hold cryptocurrencies, expects to see an increase in tax evasion cases. The US Internal Revenue Service (IRS) is already gearing up to handle these cases. The information was revealed by Guy Ficco, the head of investigations for the IRS in the United States. Ficco spoke at the Chainalysis Links event in New York. According to the IRS official, the agency has already seen an increase in the number of “pure cryptocurrency-related tax crimes,” which are separate from cases of fraud, money laundering and scams.
The United States reportedly imposes taxes ranging from 0% to 20% on long-term capital gains. Entities that made profits of up to $44,626 (around Rs. 37.2 lakh) from crypto assets in 2023 will not have to pay any long-term capital gains tax. Short-term capital gains, on the other hand, are taxed up to 37%, depending on the profits accumulated in the United States.
US citizens who knowingly lie about their cryptocurrency profits while filing taxes are charged under the Title 26 tax code in the United States. Currently, the IRS is trying to identify and crack down on this category of people.
“This may simply not report the revenue generated from crypto sales, it may hide the true basis of cryptocurrencies. So this is an area where we have seen an increase and I predict that this year and in the future there will be more cases of crypto than Title 26,” Ficco said CNBC in an interview.
Arming itself to address this expected increase in cryptocurrency tax evasion cases, the IRS in the United States is already partnering with several law enforcement divisions to improve the criminal identification process.
Additionally, the IRS has also partnered with Chainalysis, a blockchain analytics firm. With the help of Chainalysis, the US IRS is trying to understand gaps in Web3 protocols or settings that cybercriminals could exploit to get what they want.
As the US prepares to tackle cryptocurrency tax evaders, shocking details of international tax evasion cases were reported in 2023 Divly, a technology research company based in Sweden. The research platform, at the time, said that only 0.53% of cryptocurrency holders globally paid taxes on their cryptocurrency income in 2022.
According to the Divly report, at the time, the Philippines had the lowest percentage of crypto taxpayers, just 0.03%. India was ranked third to last in this index with only 0.07% of cryptocurrency holders having paid cryptocurrency taxes.
In India, where all cryptocurrency profits are taxed at 30%, cryptocurrency players are integrate tax services to their platforms so that their users can calculate the amount and pay the government. The Indian Web3 community believes that if they showed discipline and consistency in respecting government laws, authorities could become more responsive to their needs and offer greater support to the growth of the sector.
In July last year, Tax nodesa cryptocurrency tax company, had announced that it would offer free NFTs to people who paid cryptocurrency taxes through its platform.