The US Attorney General’s Cyber Digital Task Force recently issued a comprehensive report outlining the United States’ framework for enforcement against cryptocurrency-related crimes.
This report explains emerging threats, enforcement challenges, and case studies. According to the task force report, tax evasion is one of the three major ways bad actors use cryptocurrency.
This report adds to other reports issued in 2020 by regulators such as GAO, TIGTA, OECD where crypto taxes have been the main theme.
According to the IRS Tax Crimes Handbook, there are two kinds of tax evasion: evasion of assessment and evasion of payment.
Evasion of assessment is the more common of the two and occurs when someone willfully attempts to omit income from taxes, significantly underreports income, or overstates deductions. The Cyber Digital Task Force report points out: “not reporting capital gains from the sale or other disposition of the cryptocurrency, not reporting business income received in cryptocurrency, not reporting wages paid in cryptocurrency, or using cryptocurrency to facilitate false invoice schemes designed to fraudulently reduce business income are examples of evasion of assessments”
The report further states that these are frequently seen evasion of assessment scenarios in the cryptocurrency world. Evasion of payment occurs after the tax assessment is made and the taxpayer conceals funds or other assets that could be used to pay off the tax liability.
