“Cryptocurrency: the new audit frontier”

Are you on the radar for an audit from IRS?  The answer is probably yes.  Let’s look at why.  The IRS has recently hired a tremendous number of auditors to their current work force.  Because the IRS number of auditors over the last 7 years has been low, tax payers have taken advantage and determined that their chance of an audit is pretty low.  Tax payers have also reasoned that if the very rich pay little to nothing in taxes, then why should they pay any more percentage wise then them.  And this is where the problem starts.  People took chances and did not receive those dreaded IRS letters that they are being audited.  So tax payers started to be less than honest on their returns and revenue collection totals started to drop.  

Then came the boom in Cryptocurrency.  People did not realize the taxable events that cryptocurrency generates and were not reporting those transactions at all. Every time you exchange or buy something with cryptocurrency, a taxable event has occurred.  If you received air drops and added coins to your base, a taxable event has occurred. If you sold cryptocurrency, a taxable event has occurred.   A couple of years ago, there were 250,000 transactions a day in Cryptocurrency and the IRS only recorded 832 tax returns showing cryptocurrency activity.  Cryptocurrency has only exploded since then.

The IRS then obtained access to certain cryptocurrency platforms and realized that this could be the easiest audit they could do because everything is recorded on those block chains.  The IRS has recently hired many, many new auditors to assist them and have since been trained in a couple of new areas for audits.  The bulk of these new auditors will be going after Cryptocurrency non-filers.   The balance of the new auditors is being trained in corporate returns and pass-through entities.