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IRS Says Crypto Fraud Enforcement Outlook is Positive & New Crypto Form 1099-DA

IRS Says Crypto Fraud Enforcement Outlook is Positive & New Crypto Form 1099-DA

A top official on the IRS team responsible for monitoring criminal tax activity is confident the agency is well-equipped to adapt to emerging threats to taxpayers in the cryptocurrency space.

Most cases opened by the IRS' Criminal Investigation (CI) division involving the use of cryptocurrencies and their blockchain architecture to illegally move funds fall under the U.S. Criminal Code. 

However, Tax-related Matters Have Become More
Commonplace In CI Operations, According To James Robnett, The Division's Deputy Chief.

"With crypto, we're beginning to see more tax work," he said on a June 24 panel at a tax forum hosted by New York University, explaining that about half of current cases are under the tax code. Despite the relatively new emergence of cryptographic technology, Robnett believes the IRS can still follow the money. He described crypto as "just another value" that can be traced, similar to other tax evasion or fraud schemes that use electronic wires or offshore banks.

Indictments with tax cases can take longer than money laundering cases due to reviews by the Justice Department and the IRS Chief Counsel's Office, according to Robnett. An argument establishing a pattern of criminal behavior beyond a plausible mistake requires more time with tax cases.

"We really have to nail down the intent, the knowledge and the purpose of why that person did what they did," he said.

CI will soon have at its disposal more transaction information with which to monitor criminal activity. 

"Beginning In 2023, There's Going To Be A New Form That Exchangers And Other Transactors Of Crypto" Must File On Behalf Of Customers, Robnett Said, Disclosing That It
Will Be Called Form 1099-DA, For "Digital Assets."

The new form will come in the wake of the Infrastructure Investment and Jobs Act (IIJA; PL 117-58), signed by President Joe Biden in November. A $1.2 trillion package, the IIJA featured new digital asset transaction reporting requirements, including an amendment to Code Sec. 6050 providing that taxpayers who receive over $10,000 in cash in one transaction or in two or more related transactions must file a Form 8300 for applicable transactions occurring on or after January 1, 2023. Digital assets are considered cash for these transactions.

The IIJA also amended Code Sec. 6045 to include transfers of digital assets as reportable on Form 1099 and expanded the definition of a broker to include those "responsible for or regularly providing any service effectuating transfers of digital assets on behalf of another person."

According to Robnett, Form 1099-DA is currently in the drafting stage with consultation from CI so that when copies are delivered to brokers' customers, figures can be accurately reported. The digital asset reporting framework under the IIJA originally indicated that Forms 1099-B would be used.

Robnett said the new Form 1099-DA will be available in time for CI's tax case work for the 2024 filing season.

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Thomson Reuters Checkpoint

Read more at: Tax Times blog

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