Sometimes, the IRS will put special focus on certain things when it comes to tax enforcement. One area that has been getting increased IRS attention lately is the buying and selling of digital currencies, such as bitcoin. Particularly, the IRS has been on the lookout for people avoiding paying taxes on gains made buying and selling such currencies.
So, it is possible for digital currency users to fall under IRS scrutiny. IRS scrutiny could in some cases lead to a person facing serious allegations, such as accusations of tax evasion. When a person has been accused of evading taxes in relation to digital currency sales or other taxable financial activity, their future can be greatly affected by how they respond to the accusations. Skilled tax attorneys can help individuals navigate the issues and processes related to responding to such a situation.
There are a variety of tools and tactics the IRS might use when tackling an enforcement matter it is giving increased attention to. Sometimes, the agency turns to new tools in such efforts. In its enforcement efforts related to bitcoin, it appears the agency is turning to some high-tech tools. It has been reported that the IRS is paying for the use of special software aimed at helping determine who the owners are of digital bitcoin “wallets”. Such information could be used by the IRS to try to identify bitcoin users who it thinks might be evading taxes.
New enforcement tools by the IRS can sometimes raise concerns for taxpayers. The nature of such concerns depends on the specifics of the tool and its use. Examples of concerns that could come up in connection to new IRS enforcement tactics include privacy, fairness or accuracy concerns. When a taxpayer has concerns about a new enforcement tool the IRS has directed towards them, they may want to talk with a tax lawyer to learn about their rights and options related to the situation.
What do you think the future will see regarding what tools and tactics the IRS uses in its enforcement efforts related to tax issues connected to digital currencies?
Source: Fortune, “The IRS Has Special Software to Find Bitcoin Tax Cheats,” Jeff John Roberts, Aug. 22, 2017