IRS Cryptocurrency Investigation Lawyer
Gains from virtual currency transactions generally qualify as taxable income for federal income tax purposes. As a result, failure to report these transactions to the Internal Revenue Service (IRS) can result in allegations of tax evasion or tax fraud. The IRS is prioritizing enforcement in this area, and we have seen a growing number of cryptocurrency-related criminal tax investigations in recent years.
International Tax Team Lead
Former DOJ Attorney
International Tax & CPA Team Lead
International Tax Team
Former Special Agent (IRS)
Taxpayers living in the United States and abroad must strictly comply with the nation’s tax laws. This included maintaining strict compliance related to transactions involving cryptocurrency and other digital assets. Failure to maintain strict tax compliance can expose taxpayers to substantial penalties in the event of a criminal investigation—and these investigations are becoming increasingly common.
Our Lawyers Defend Cryptocurrency Investors and Other Clients in IRS Investigations Worldwide
At Oberheiden PC, our international tax lawyers defend cryptocurrency investors and other clients worldwide who are facing scrutiny from the Internal Revenue Service (IRS). We handle cases involving all federal tax laws, including the Internal Revenue Code (IRC), Bank Secrecy Act (BSA), and Foreign Account Tax Compliance Act (FATCA). Investigations involving crypto transactions can expose investors and other individuals and businesses to substantial penalties in the event of criminal prosecution, and this makes it critical to focus on building and executing a defense strategy that avoids a federal indictment.
Representative examples of cryptocurrency-related investigations our tax attorneys handle include those involving allegations of:
- Underreporting crypto income and cryptocurrency-related tax liability
- Improperly reporting virtual currency transactions
- Failure to report cryptocurrency-related taxable events
- Failure to file tax returns and other mandatory tax filings
- Failure to file offshore account disclosures (FBAR and IRS Form 8938)
- Other cryptocurrency reporting violations
- Money laundering and other financial crimes
IRS Criminal Investigation (IRS CI) targets taxpayers suspected of all forms of criminal noncompliance. From unreported income to noncompliance with offshore reporting obligations, an extremely wide range of cryptocurrency tax issues can expose taxpayers to serious criminal charges. Our attorneys have extensive experience advising crypto investors and other clients in these cases; and, if you are facing scrutiny related to your cryptocurrency holdings, we can use our experience to help protect you by all means available.
We Also Defend Clients Facing Scrutiny from the DOJ, CFTC, and SEC
Along with advising clients who are facing scrutiny from the IRS, we also advise clients who are facing scrutiny from other federal agencies. Several federal regulators have a hand in enforcing cryptocurrency-related compliance, and facing scrutiny from any of these regulators has the potential to lead to serious consequences.
Representative examples of other matters our law firm handles include:
US Department of Justice (DOJ) Cryptocurrency Investigations
The US Department of Justice (DOJ) is increasingly focusing its enforcement efforts on white collar cases involving digital currencies, smart contracts, prediction markets, and other emerging technologies. The DOJ is responsible for pursuing criminal charges at the federal level, and it routinely pursues a wide range of charges against individuals and organizations suspected of cryptocurrency tax fraud and related crimes.
US Commodity Futures Trading Commission (CFTC) Cryptocurrency Investigations
The US Commodity Futures Trading Commission (CFTC) conducts cryptocurrency-related investigations in various circumstances as well. While the CFTC has civil enforcement authority, it works alongside the DOJ to pursue criminal charges when warranted. This includes charges related to digital asset derivatives, futures, and swaps that are regulated under the Commodity Exchange Act.
US Securities and Exchange Commission (SEC) Cryptocurrency Investigations
The US Securities and Exchange Commission (SEC) conducts cryptocurrency investigations under the nation’s securities laws. From a legal perspective, these investigations can be extremely high-risk, as they can lead to both SEC enforcement actions and federal criminal charges. We defend cryptocurrency investors, investment advisers, and other clients facing accusations related to initial coin offerings (ICOs), buying and selling cryptocurrency, and other SEC-regulated transactions.
How We Can Help During a Federal Cryptocurrency Investigation
If you are facing cryptocurrency-related federal scrutiny, our attorneys can work quickly to help protect you by all means available. In this scenario, we will:
- Quickly Assess Your Risk – We will conduct a comprehensive risk assessment protected by the attorney-client privilege so that we can help you make informed and strategic decisions about your next steps.
- Thoroughly Evaluate Your Options – While voluntary disclosures are no longer on the table once cryptocurrency audits and investigation are underway, you could still have various options for avoiding unnecessary consequences. Our attorneys will ensure that you have a clear understanding of the options you have available.
- Help You Make Informed Decisions – When facing federal scrutiny, informed decision-making is critical. Our attorneys will rely on their extensive experience (including prior experience as DOJ white collar prosecutors), to provide the insights you need.
- Deal with Your Tax Situation on Your Behalf – Once you engage our law firm to represent you, we will be able to communicate directly with IRS CI and any other relevant federal authorities on your behalf. In doing so, we will work to gain a comprehensive understanding of the scope of the investigation and the charges that are on the table.
- Target a Resolution that Avoids Criminal Prosecution – In many cases, tax penalties can be mitigated through negotiations and settlement with the IRS. Other federal authorities routinely enter into negotiated settlements as well. Whether it is in your best interests to negotiate a settlement or dispute the government’s allegations in their entirety, we will target a resolution that avoids criminal prosecution in federal court.
FAQs: Defending Against Federal Cryptocurrency Tax Investigations
Are US taxpayers required to report transactions on cryptocurrency exchanges to the IRS?
The IRS taxes cryptocurrency as property for federal income tax purposes, buying and selling cryptocurrency can both be taxable events under federal law. As a result, US taxpayers are generally required to report transactions on cryptocurrency exchanges to the IRS.
The IRS launched its cryptocurrency compliance program in 2018; and, since then, it has continued to aggressively enforce cryptocurrency-related tax compliance. If you have received an IRS warning letter as a cryptocurrency investor, or if you have been served with a search warrant or subpoena from IRS CI, you should engage experienced defense counsel immediately.
When does failing to report cryptocurrency gains constitute criminal tax fraud?
To pursue charges for criminal tax fraud, federal prosecutors generally need evidence of intent. As a result, if you knowingly failed to report cryptocurrency gains to the IRS, you could be at risk of facing criminal charges. In this scenario, you should gather all documentation you have related to the transactions in question, and then you should consult with a tax lawyer who has specific experience handling cryptocurrency-related tax fraud investigations.
What are the penalties for criminal cryptocurrency fraud?
Potential penalties for criminal cryptocurrency fraud generally include fines and prison time. If you are under investigation, the specific penalties you are facing depend on the specific charges that the government is pursuing. Some examples include:
- Tax Evasion – Up to a $100,000 fine ($500,000 for corporations) and five years of federal prison time.
- Bank Secrecy Act Violations – Up to a $500,000 fine and 10 years of federal prison time depending on the circumstances involved.
- Money Laundering – Up to a $500,000 fine (or twice the value of the cryptocurrency involved, whichever is greater) and 20 years of federal prison time.
- Wire Fraud – Up to a $1 million fine and 30 years of federal prison time depending on the circumstances involved.
- Conspiracy to Defraud the United States – The same penalties as the offense underlying the government’s conspiracy allegations.
Again, these are just examples. Federal prosecutors can (and do) pursue other charges in cryptocurrency fraud cases as well, and all of these charges carry substantial penalties.
The IRS uses blockchain analytics tools to investigate cryptocurrency transactions. Additionally, financial institutions and cryptocurrency exchanges are required to comply with federal anti-money laundering (AML) and know-your-customer (KYC) regulations—and this means that the IRS can obtain taxpayers’ identities from these entities as well. From a federal law enforcement perspective, blockchain technology is not as anonymous as many people believe, and the IRS pursues cryptocurrency-related investigations against non-filers on a regular basis.
Yes, all communications with your lawyer will be protected under the attorney-client privilege. Your lawyer should not share any information with the federal government unless it is in your best interests and you authorize your lawyer to do so. If you have concerns about facing criminal prosecution for tax fraud or any other cryptocurrency-related offense, we strongly encourage you to contact us for more information.
Schedule a Confidential Call with a Cryptocurrency Tax Lawyer at Oberheiden PC
To speak with a senior cryptocurrency tax lawyer at Oberheiden PC in strict confidence, contact us today. Call 888-680-1745 or tell us how we can reach you online now to arrange a free and confidential consultation as soon as possible.
Related Pages:
