An image of Bitcoin and US currencies is displayed on a screen as delegates listen to a panel of … [+] speakers during the Interpol World Congress in Singapore on July 4, 2017. – The three-day conference on fostering innovation for future security challenges is taking place from July 4 to 6. (Photo by ROSLAN RAHMAN / AFP) (Photo by ROSLAN RAHMAN/AFP via Getty Images)AFP via Getty Images
The IRS Fiscal Year 2022 Budget talks about cryptocurrency and how the service is planning to use in-house technology and outside contractors to reinforce crypto tax compliance. Within the $13.2 billion total 2022 budget, $32 million ($3 million on IT specialist compensation, $6 million on hardware & software and $23 million on contractors) is allocated to reinforce cryptocurrency related enforcement initiatives.
The $32 million will enable the IRS to:Hire more specialized contractors on cryptocurrency and cybersecurity verticals. Build an internal cryptocurrency/blockchain analytics dashboard named STRIKES. Establish a One-IRS approach to cryptocurrency non-compliance around both tax and non-tax case development. Seek help from private parties in analytics, cybercrime, forensics, accounting/discovery support, investigative support and consulting services.
STRIKES, IRS’s In-house Blockchain Analytics Tool
The budget explains how the IRS Criminal Investigation division is using outside contractors at the moment. Currently, a specialized contractor is building STRIKES, IRS-owned cryptocurrency/blockchain analytics tool which harnesses the power of existing vendor products by combining the strengths of each product. The IRS expects this tool to be available in other divisions of the IRS soon.
One-IRS Approach to Improve Cryptocurrency Tax Compliance
The funding will also be used to establish a One-IRS approach. This system will allow the IRS to easily partner up with other business units to catch crypto tax cheats by identifying illicit activity patterns. Further, the IRS is expecting to employ contractors to proactively generate leads around tax non-compliance and illegal activities involving cryptocurrency.
Disclaimer: this post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.