IRS expects to see a rise in crypto tax evasion cases in the US: Report

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The US, where an estimated 40 percent of adults currently own crypto assets, is expected to see a rise in tax evasion cases. The US Internal Revenue Service (IRS) is already preparing to handle these cases. This information was disclosed by Guy Fico, Chief Investigating Officer of IRS in America. Ficco was speaking at the Chainalysis Links event in New York. According to the IRS official, the agency is already seeing an increase in the number of 'pure crypto tax crimes' – which are separate from cases of fraud, money laundering and scams.

The US reportedly taxes long-term capital gains ranging from zero percent to 20 percent. Entities that made profits of $44,626 (approximately Rs 37.2 lakh) from crypto activities in 2023 will not need to pay any long-term capital gains tax. However, in the US, short-term capital gains are taxed at up to 37 percent, depending on the accumulated gains.

US citizens who knowingly lie about their crypto profits when reporting taxes are charged under Title 26 tax code in the US. Currently, the IRS is trying to identify and crack down on this category of people.

β€œIt may not fully report the income generated from crypto sales, it may hide the true basis in crypto. So that's an area that we've seen an uptick in and I expect there's going to be more charges in Title 26 crypto cases this year and going forward,” Ficco told CNBC in an interview.

Gearing up to deal with this expected increase in crypto tax evasion cases, the IRS in the US is already partnering with various divisions of law enforcement to improve the criminal identification process.

Additionally, the IRS has also teamed up with blockchain analysis firm Chainalysis. With the help of Chainalysis, the US IRS is looking to understand vulnerabilities in Web3 protocols or settings that cyber criminals can exploit to make their way in.

While the US prepares to tackle crypto tax evaders, shocking details on international tax evasion cases in 2023 were revealed by Sweden-based tech research firm Divly. At the time the research platform claimed that only 0.53 percent of global crypto holders paid taxes on their crypto income in 2022.

At the time, the Philippines had the lowest percentage of crypto taxpayers at just 0.03 percent, Divly reports. India ranked third in this index with only 0.07 percent of crypto holders paying their crypto taxes.

In India, where all crypto profits are taxed at 30 percent, crypto players are integrating taxation services on their platforms so that their users can calculate the amount and make payments to the government. The Indian Web3 community believes that if it shows discipline and consistency in following government laws, authorities can be more sensitive to their needs and provide stronger support for the development of the sector.

In July last year, crypto taxation firm TaxNodes announced that it would be offering complimentary NFTs to people paying crypto taxes through its platform.