IRS Now Strongly Focused On So-Called “Cryptocurrency”

In White Collar Crimes by RSFJ

On behalf of Rosenblum Schwartz & Fry posted in White Collar Crimes on Tuesday, November 28, 2017.

Criminal law authorities and enforcers in the United States are being progressively challenged these days by unfolding technologies that test their abilities to monitor citizens’ actions and call out unlawful behavior when they allege it is occurring.

Investigators sometimes go to court for approval to unlock smartphones they suspect were used to abet crime, for example. The “dark web” spells a relatively new landscape where all manner of subterfuge and criminal activity is alleged. Hackers’ expertise is cited in everything from ransom attempts to large-scale identity theft.

And now there is cryptocurrency. Some readers who are unfamiliar with the term might comprehend it most readily through reference to a single word: bitcoin.

A discussion of whether that will be a standard form of asset identification and wealth transfer in the future is beyond the means of this blog.

What isn’t, though, is this post’s nod to the IRS, which is clearly focused upon — and concerned by — bitcoin activity that is increasingly occurring and that the agency contends is unlawful in many instances.

It’s no secret, of course, that the IRS is a jealous mistress when it comes to tax matters. And it is clearly aroused now by what it believes are illicit attempts by some individuals to transact in bitcoins and related wealth mechanisms to avoid agency scrutiny.

Select taxpayers, noted the IRS recently in a lawsuit the agency filed against the cryptocurrency dealer Coinbase, “have made use of virtual currencies to avoid the reporting and payment of taxes.”

There is no recipe more certain than that for incurring a hostile agency reaction, and Coinbase now finds itself locked in a court battle with the IRS regarding a demand that it turn over a massive amount of customer data for the agency’s close scrutiny.

The company is steadfastly resisting, but it might be waging a futile battle. Signals have been sent by a federal judge indicating a likelihood that she will side with the IRS concerning its demand, given the agency’s historical authority and reach regarding tax matters.

“I have to give tremendous discretion to the agency,” the judge stated recently.

We will keep readers duly informed regarding any material developments that occur in the IRS-Coinbase spat.