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IRS Prioritizes Scrutiny of Bitcoin and Crypto Traders as Digital Currencies Emerge as a Key Focus for the Agency: Report

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The Internal Revenue Service (IRS) of the United States is preparing for a new campaign aimed at addressing the tax implications associated with the digital assets industry.

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The IRS recently appointed seasoned professionals Sulolit “Raj” Mukherjee and Seth Wilks as executive advisers in order to get ready to collect cryptocurrency taxes.

Wilks previously held the position of vice president of government relations at the cryptocurrency tax software company TaxBit, while Mukherjee previously held the position of global head of tax at blockchain software company ConsenSys and was an executive at the US division of cryptocurrency exchange Binance.

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The two new hires will aid the IRS in better understanding the industry, which is currently a “top IRS priority,” according to Doug O’Donnell, Deputy Commissioner of the IRS for Services and Enforcement.

“Seth and Raj expand our ability to understand this sector while designing systems for reporting of cryptocurrency and digital assets and related transactions. Improving employee capacity and access to tools in this rapidly evolving global landscape is a top IRS priority.”

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In terms of cryptocurrency enforcement, “everyone’s been waiting for the tidal wave of this enforcement activity,” claims James Creech, an attorney and senior manager at the accounting firm Baker Tilly. According to him, cryptocurrency tax reporting has been “very hodgepodge” thus far.

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The IRS’s audit rates fell sharply for all income levels between 2010 and 2019, from 0.9% to 0.25%, according to the U.S. Government Accountability Office. This decline was primarily caused by staffing reductions brought on by lower funding.

According to CNBC, the IRS has concentrated on reversing the historically low audit rates of corporations, high earners, and intricate partnerships.

The IRS Criminal Investigation unit states in its 2023 annual report that even with “chain-hopping and token swapping,” the organization is still attempting to follow the public’s digital asset trail.

“We continue to lead the way in our investigative efforts involving digital assets, and we are reaping the benefits of early investment in our cyber capabilities and training. Our partnerships with the private sector created opportunities for us to solve the most complex crypto-related crimes in the world. We remain focused on stopping those who attempt to exploit new technology for nefarious purposes, mitigating illicit finance, and identifying national security risks.

We know that digital assets provide opportunities for responsible financial innovation, and most people using cryptocurrency do so for legitimate purposes. But, we also know that digital assets pose a risk of facilitating money laundering, cybercrime and ransomware, narcotics, human trafficking, terrorism, proliferation financing, and tax crimes. Chain-hopping and token swapping have become common digital assets techniques used to make following the digital money trail more difficult, but not impossible.”


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