IRS Tax News

  • 21 Mar 2022 2:16 PM | Anonymous

    Notice 2022-14  sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for March 2022 used under § 417(e)(3)(D), the 24-month average segment rates applicable for March 2022, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv). 

    Notice 2022-14 will be in IRB:   2022-14, dated April 4, 2022.


  • 21 Mar 2022 2:15 PM | Anonymous

    Understanding Crowdfunding
    Crowdfunding is a method of raising money through websites by soliciting contributions from a large number of people. The contributions may be solicited to fund businesses, for charitable donations, or for gifts. In some cases, the money raised through crowdfunding is solicited by crowdfunding organizers on behalf of other people or businesses. In other cases, people establish crowdfunding campaigns to raise money for themselves or their businesses.   

    Receipt of a Form 1099-K for Distributions of Money Raised Through Crowdfunding
    The crowdfunding website or its payment processor may be required to report distributions of money raised if the amount distributed meets certain reporting thresholds by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS. If Form 1099-K is required to be filed with the IRS, the crowdfunding website or its payment processor must also furnish a copy of that form to the person to whom the distributions are made. The American Rescue Plan Act clarifies that the crowdfunding website or its payment processor is not required to file Form 1099-K with the IRS or furnish it to the person to whom the distributions are made if the contributors to the crowdfunding campaign do not receive goods or services for their contributions. 

    Prior to 2022, the threshold for a crowdfunding website or payment processor to file and furnish a Form 1099-K was met if, during a calendar year, the total of all payments distributed to a person exceeded $20,000 in gross payments resulting from more than 200 transactions or donations. 

    For calendar years beginning after December 31, 2021, the threshold is lowered and is met if, during a calendar year, the total of all payments distributed to a person exceeds $600 in gross payments, regardless of the number of transactions or donations. 

    Accordingly, if a crowdfunding website or its payment processor makes distributions of money raised that meet the reporting threshold, and the contributors to the crowdfunding campaign received goods or services for their contributions, then a Form 1099-K is required to be filed with the IRS. Additionally, if the distributions of the money raised are made to the crowdfunding organizer, a copy of the Form 1099-K must be furnished to the organizer; alternatively, if the distributions of the money raised are made directly to individuals or businesses for whom the organizer solicited funds, the Form 1099-K must be furnished to those individuals or businesses that receive amounts that meet the reporting threshold.   

    A person receiving a Form 1099-K for distributions of money raised through crowdfunding may not recognize the filer’s name on the form. Sometimes the payment processor used by the crowdfunding website, rather than the crowdfunding website itself, will issue the Form 1099-K and be included as the filer on the form. If the recipient of a Form 1099-K does not recognize the filer’s name or the amounts included on the Form 1099-K, the recipient can use the filer’s telephone number listed on the form to contact a person knowledgeable about the payments reported.

    Box 1 on the Form 1099-K will show the gross amount of the distributions made to a person during the calendar year, but issuance of a Form 1099-K doesn’t automatically mean the amount reported on the form is taxable to the person receiving the form.  As discussed below, the income tax consequences depend on all the facts and circumstances. If the distributions reported on a Form 1099-K are not reported on the tax return of the recipient of the form, the IRS may contact the recipient for more information. The recipient will have the opportunity to explain why the crowdfunding distributions were not reported on the recipient’s tax return. 

    Tax Treatment of Money Raised Through Crowdfunding
    Under federal tax law, gross income includes all income from whatever source derived unless it is specifically excluded from gross income by law. In most cases, property received as a gift is not includible in the gross income of the person receiving the gift. 

    If a crowdfunding organizer solicits contributions on behalf of others, distributions of the money raised to the organizer may not be includible in the organizer’s gross income if the organizer further distributes the money raised to those for whom the crowdfunding campaign was organized. 

    If crowdfunding contributions are made as a result of the contributors’ detached and disinterested generosity, and without the contributors receiving or expecting to receive anything in return, the amounts may be gifts and therefore may not be includible in the gross income of those for whom the campaign was organized.  Contributions to crowdfunding campaigns are not necessarily a result of detached and disinterested generosity, and therefore may not be gifts.  Additionally, contributions to crowdfunding campaigns by an employer to, or for the benefit of, an employee are generally includible in the employee’s gross income.

    Taxpayers may want to consult a trusted tax professional for information and advice regarding how to treat amounts received from crowdfunding campaigns. 

    Recordkeeping for Money Raised Through Crowdfunding
    Crowdfunding organizers and any person receiving amounts from crowdfunding should keep complete and accurate records of all facts and circumstances surrounding the fundraising and disposition of funds for at least three years.


    Links


  • 18 Mar 2022 3:46 PM | Anonymous

    WASHINGTON — The IRS reminds taxpayers that there is a virtual currency question at the top of Form 1040, Form 1040-SR and Form 1040-NR. It asks: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

    All taxpayers filing Form 1040, Form 1040-SR or Form 1040-NR must check one box answering either “Yes” or “No” to the virtual currency question. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency in 2021.

    When taxpayers can check “No”
    Taxpayers who merely owned virtual currency at any time in 2021 can check the “No” box when they have not engaged in any transactions involving virtual currency during the year, or their activities were limited to:

    • Holding virtual currency in their own wallet or account.
    • Transferring virtual currency between their own wallets or accounts.
    • Purchasing virtual currency using real currency, including purchases using real currency electronic platforms such as PayPal and Venmo.
    • Engaging in a combination of holding, transferring, or purchasing virtual currency as described above.

    When taxpayers must check “Yes”
    The list below covers the most common transactions in virtual currency that require checking the “Yes” box:

    • The receipt of virtual currency as payment for goods or services provided;
    • The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift;
    • The receipt of new virtual currency as a result of mining and staking activities;
    • The receipt of virtual currency as a result of a hard fork;
    • An exchange of virtual currency for property, goods, or services;
    • An exchange/trade of virtual currency for another virtual currency;
    • A sale of virtual currency; and
    • Any other disposition of a financial interest in virtual currency.

    If a taxpayer disposed of any virtual currency that was held as a capital asset through a sale, exchange or transfer, they must check “Yes” and use Form 8949 to figure their capital gain or loss and report it on Schedule D (Form 1040).

    If a taxpayer received any virtual currency as compensation for services or disposed of any virtual currency that they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040, 1040-SR, or 1040-NR, line 1, or inventory or services from Schedule C on Schedule 1).

    For more information, see page 17 of the 2021 Form 1040 Instructions and visit IRS.gov for general information on virtual currency and other related resources.


  • 18 Mar 2022 2:54 PM | Anonymous

    Revenue Procedure 2022-20 provides guidance regarding the public approval requirement under § 147(f) of the Internal Revenue Code for tax-exempt qualified private activity bonds.  Specifically, this revenue procedure provides that hearings held by teleconference as described in section 4 of this revenue procedure will be treated as held in a location that, based on the facts and circumstances, is convenient for residents of the approving governmental unit for the purpose of § 1.147(f)-1(d)(2) of the Income Tax Regulations.

    Revenue Procedure 2022-20 will be in IRB:  2022-14, dated April 4, 2022.


  • 18 Mar 2022 10:48 AM | Anonymous

    Notice 2022-11 provides an indexing factor for the qualifying payment amount for items and services furnished in 2022 for purposes of sections 9816 and 9817 of the Internal Revenue Code, as added by the No Surprise Act, in the case of a group health plan or group or individual health insurance issuer that does not have sufficient information as of January 31, 2019 to calculate the median of the contracted rates or for new items and services.

    Notice 2022-11 will be in IRB:  2022-14, dated 04/04/2022.


  • 17 Mar 2022 8:08 AM | Anonymous

    FS-2022-18, IRS Spotlights Criminal Investigation Law Enforcement: CI pursues financial crimes like money laundering, terrorist financing, cybercrimes, and sanctions evasion—including investigating and seizing assets of Russian elites


  • 17 Mar 2022 7:51 AM | Anonymous

    Program Areas

    Below is just a small example of the types of cases in which CI has led or been significantly involved in over the last few years. These cases show the breadth and skill of CI’s Special Agents in various types of fraud and criminal activity that have had significant impacts on the financial system at home and abroad. Despite having 25% less staff over the course of the decade, CI has consistently delivered strong results. An increase in funding would help to add more investigations to the pipeline, ensure more criminals are held accountable, and shore up the global financial system. 

    Narcotics/Counterterrorism/National Security Investigations

    IRS:CI targets the illicit financial flows of Transnational Criminal Organizations to reduce the economic incentive of narcotics trafficking, terrorist financing, and money laundering. IRS:CI has key positions to enhance operational coordination at DEA SOD, EO-OCDETF, OCDETF Fusion Center, FinCEN, IOC2, HIDTA, J-CODE in addition to Joint Terrorism Task Force (JTTF) and National Counterintelligence Task Force (NCITF). Investigations involve money laundering (Title 18) and currency violations (Title 31). IRS:CI is the largest user of Bank Secrecy Act data to identify significant financial criminal activity. Investigative areas include: money laundering, narcotics, public corruption, corporate fraud, terrorism, healthcare fraud, and financial institution fraud. 

    Aguirre – 12/03/21

    https://www.irs.gov/compliance/criminal-investigation/sinaloa-cartel-leader-convicted

    • Herman Aguirre, the leader of transnational drug conspiracy tied to the El Chapo Mexican drug cartel, was convicted of narcotics conspiracy, and operating a continuing criminal enterprise and money laundering conspiracy. He was sentenced to serve life in prison.
    • Aguirre was the leader of a transnational drug trafficking organization that utilized contacts and a source of supply whose territory included Mexico, Arizona, California, and elsewhere. The source of supply was the Sinaloa Cartel, led by Joaquín "El Chapo" Guzmán and Ismael "El Mayo" Zambada. 

    Vasquez-Hernandez – 11/24/14

    https://www.justice.gov/usao-ndil/pr/sinaloa-cartel-member-sentenced-22-years-federal-prison-plea-agreements-unsealed

    • Alfredo Vasquez-Hernandez, 59, was sentenced to 22 years in prison for his role in a $1 billion trafficking conspiracy.
    • Vasquez-Hernandez was a high-ranking member of the Sinaloa cartel and a close lieutenant of Joaquin 'El Chapo' Guzman.
    • Hernandez was the logistics man behind shipping tons of drugs by train from Mexico to Chicago concealed amid furniture cargo. 

    Singapore Solution – 9/28/2021

    https://www.justice.gov/opa/pr/indictment-unsealed-against-six-individuals-and-foreign-financial-service-firm-tax-evasion

    • Six offshore financial service executives and a Swiss financial services company were charged with conspiracy to defraud the IRS for allegedly helping three large-value U.S. taxpayer-clients conceal more than $60 million in income and assets held in undeclared, offshore bank accounts to evade U.S. income taxes.

    Defense Attorney Money Laundering Conspiracy – 10/28/2021

    https://www.irs.gov/compliance/criminal-investigation/federal-jury-convicts-baltimore-defense-attorney-for-money-laundering-conspiracy

    • A federal jury convicted an attorney of conspiracy to commit money laundering after evidence showed that received drug proceeds from clients and associates who engaged in drug trafficking and used bank accounts of the law firm where he practiced to launder more than a million dollars. 

    Zong Money Laundering Case – 12/7/2018

    https://www.justice.gov/usao-ak/pr/former-anchorage-resident-sentenced-federal-prison-international-money-laundering

    • In December 2018, in Anchorage, Alaska, Mitchell Zong was sentenced to 30 months in prison for conspiracy to commit money laundering with his father, Kenneth Zong. Mitchell Zong laundered approximately $980,000 of Iranian derived funds knowing the funds came from his father’s illegal transactions with Iranian nationals. 

    UniCredit Bank IEEPA Case – 4/15/2019

    UniCredit Bank AG Agrees to Plead Guilty for Illegally Processing Transactions in Violation of Iranian Sanctions | OPA | Department of Justice

    • In 2019, UniCredit Bank AG (UCB AG), a financial institution headquartered in Munich, operating under the name HypoVereinsbank, and part of the UniCredit Group agreed to plead guilty to conspiring to violate IEEPA and to defraud the United States by processing hundreds of millions of dollars of transactions through the U.S. financial system on behalf of an entity designated as a weapons of mass destruction proliferator and other Iranian entities subject to U.S. economic sanctions. 
    • UniCredit Bank Austria (BA), another financial institution in the UniCredit Group, headquartered in Vienna, Austria, agreed to forfeit $20 million and entered into a non-prosecution agreement to resolve an investigation into its violations of IEEPA.  UniCredit SpA, the parent of both UCB AG and BA, agreed to ensure that UCB AG and BA’s obligations are fulfilled. 

    Cyber/Cryptocurrency Investigations

    Since 2014, CI Cyber Crimes has proportionately grown in both resources and results. Beginning with one Cyber Crimes Unit in the Washington, DC area, CI was able to successfully prosecute some of the first known criminal actors in this space (e.g., Liberty Reserve, Silk Road and Btc-e). These investigations set the foundation and framework for our future efforts. Soon after, CI established a second Cyber Crimes Unit in the Los Angeles Field Office followed by cyber coordinators across the nation and additional support personnel to provide investigative research and analysis. 

    In FY21, CI was responsible for the seizure of cryptocurrency valued at more than $3.5B. To date in FY22, CI has already surpassed that amount. 

    BITCONNECT – 2/25/2022

    https://www.justice.gov/usao-sdca/pr/founder-fraudulent-cryptocurrency-charged-2-billion-bitconnect-ponzi-scheme

    • A citizen and resident of India was indicted for his alleged role in a massive criminal conspiracy involving the cryptocurrency company he founded, BitConnect.
    • The individual and his co-conspirators allegedly defrauded global investors of over $2 billion—believed to be the largest cryptocurrency fraud ever charged. 

    BITFINEX – 2/8/2022

    https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency

    • Two individuals were arrested in Manhattan for an alleged conspiracy to launder stolen cryptocurrency from a virtual currency exchange, presently valued at approximately $4.5 billion. Thus far, law enforcement has seized cryptocurrency valued over $3.6 billion linked to that hack.

    Silk Road $1B Seizure - 11/5/2020

    https://www.justice.gov/usao-ndca/pr/united-states-files-civil-action-forfeit-cryptocurrency-valued-over-one-billion-us

    • This case involved cryptocurrency CI traced which was stolen from the administrator of Silk Road that we indicted several years ago.

    Bitcoin Hamas – 8/13/2020

    https://www.justice.gov/opa/pr/global-disruption-three-terror-finance-cyber-enabled-campaigns

    • Investigation revolved around cryptocurrency fundraising for several terrorist organizations.
    • Hammas/Al Queda/ISIS used cryptocurrency fundraising intended to carry out criminal acts.
    • IRS CI helped shut this down - largest crypto seizure tied to terrorism to date. 

    Welcome to Video – 10/16/19

    https://www.justice.gov/opa/pr/south-korean-national-and-hundreds-others-charged-worldwide-takedown-largest-darknet-child

    • Largest darknet marketplace for child exploitation.
    • Resulted in over 330 arrests and 23 kids saved who were being actively abused. 

    Tax Investigations

    IRS:CI is the only federal law enforcement agency authorized to investigate Title 26 (federal criminal tax) violations. Priority areas include: abusive tax schemes, employment tax fraud, non-filer, questionable refund program, abusive return preparers, and identity theft. Crossover between tax and non-tax crimes is common. 

    Fisher Syndicated Conservation Easement – 3/1/2022

    https://www.justice.gov/opa/pr/five-tax-shelter-promoters-and-two-appraisers-indicted-syndicated-conservation-easement-tax

    • A federal grand jury returned a superseding indictment on Feb. 24 charging seven individuals with conspiracy to defraud the US and other crimes arising out of their alleged promotion of fraudulent tax shelters and $1.3Billion in alleged false tax deductions.

    Kingston Investigation – 3/16/2020

    https://www.irs.gov/compliance/criminal-investigation/jury-finds-los-angeles-businessman-guilty-in-1-billion-biodiesel-tax-fraud-scheme

    • A federal jury convicted a California businessman of criminal charges related to a $1 billion renewable fuel tax credit scheme. The individual used his company as part of a conspiracy to corrupt the biofuel tax credit program in an effort to steal over $1 billion from taxpayers and to launder the proceeds of this fraud.  

    Brockman Investigation – 10/15/2020

    https://www.justice.gov/opa/pr/ceo-multibillion-dollar-software-company-indicted-decades-long-tax-evasion-and-wire-fraud

    • The CEO of an Ohio-based software company, was indicted with tax evasion, wire fraud, money laundering, and other offenses. The charges stem from an alleged decades-long scheme to conceal approximately $2 billion in income from the IRS as well as an alleged scheme to defraud investors in the software company’s debt securities.


  • 17 Mar 2022 7:48 AM | Anonymous

    CI pursues financial crimes like money laundering, terrorist financing, cybercrimes, and sanctions evasion—including investigating and seizing assets of Russian elites

    FS-2022-18, March 2022

    Introduction

    IRS Criminal Investigation (CI) serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law. It is the only federal law enforcement agency authorized to investigate federal criminal tax violations and pursues related financial crimes, such as money laundering, currency violations, and terrorist financing. These efforts are increasingly important given emerging threats in the global financial landscape. 

    General tax fraud investigations are at the core of CI’s law enforcement efforts—for example, agents expend substantial energy unpacking domestic and offshore tax avoidance strategies that are facilitated through trust and partnership arrangements. CI also investigates money laundering by criminals and criminal organizations, corruption, and broader non-tax related fraud cases. CI has the authority to seize assets that are involved in money laundering or other unlawful activities, and it is the largest law enforcement division of Treasury with this capacity. 

    In recent years, CI has significantly expanded its presence in areas of emerging importance. Since 2015, it has built up a world-class cybercrimes program to address the exponential growth of cybercrimes impacting the tax, financial, and economic systems of the U.S. This group successfully seized more than $3.5 billion of illicit cryptocurrency in fiscal year 2021, and they have already seized more than this amount in fiscal year 2022.

    Alongside investigating cybercriminals, CI has recently been called upon to provide its unique expertise to assist with interagency efforts to enforce sanctions related to Russia’s invasion of Ukraine, as called for in the related Kleptocapture Task Force announced by the Department of Justice. Working with law enforcement entities across government, the IRS is already in the process of investigating Russian oligarchs and those who facilitate the illegal movement of money or assets on their behalf. 

    CI has experience on these dimensions: Since 2017, the IRS has been involved in more than 20 investigations directly related to illicit money laundering by oligarchs, which involved restitution of hundreds of millions of dollars paid, as well as the seizures of properties in conjunction with fellow law enforcement agencies. Typically, these investigations require IRS-CI to follow complex asset trails—any time assets are routed through United States financial systems, CI Special Agents can trace them, and they have the ability to deanonymize otherwise anonymous transactions. 

    CI cyber agents have also previously been engaged in the review and investigative efforts involving cryptocurrency transactions associated with Russian-based entities for the past several months. The project, known as Sanction Evaders, is looking at blockchain transactional information associated with sanctioned countries.

    Given its sizable—and growing—responsibilities, it is important to highlight that today the IRS lacks the resources it needs to fully support these efforts. Since 2010, the overall IRS budget has fallen by nearly 20 percent, resulting in a significant decrease in the agency’s enforcement functions. This impacts compliance directly and indirectly: Rather than serving as a deterrent, a more limited IRS presence serves as an incentive to ignore compliance responsibilities, from both a civil and criminal perspective. 

    For CI in particular, since 2010, the number of employees has fallen by approximately 25 percent, from 4,017 in 2010 to under 3,000 today. This at a time when investigations are getting more complex, as highly sophisticated criminals are turning to new and hard-to-detect ways to hide illicit gains from our sight. 

    Many of those who chose to challenge the IRS and IRS-CI have been surprised. In fact, IRS-CI has had substantial success over the course of the last several years despite being significantly under-funded. Last year, IRS-CI identified $10.4 billion from tax fraud and financial crimes and likely deterred at least an equivalent amount of such behavior, with a budget of just over $600 million. That is a direct return of more than 16:1. But this substantially understates the immensely valuable work that CI does, because having a significant IRS presence deters criminals from malfeasance. 

    With additional resources, CI will be able to do much more. The IRS’s efforts in this space are imperative to helping CI target oligarchs and those who facilitate hiding their assets. More broadly, a well-funded investigations unit is critical to ensuring that the IRS has a workforce that is able to pursue the illicit behavior of highly sophisticated criminals who reap billions and billions of dollars of profits annually through complex financial crimes. 

    • A snapshot of recent IRS CI work

    The types of criminals pursued by IRS-CI already this year are illustrative of the breadth and importance of their efforts, as well as the sophistication of the enterprises that they work to disentangle, which are set up to ensure that the illicit behavior of wealthy criminals remains unaddressed. The following information is obtained from publicly available documents. 

    Russian bank founder sentenced for evading taxes 

    In 2013, when the value of Oleg Tinkov’s investment in his Russian bank’s stock rose to over $1 billion, he quickly renounced his U.S. citizenship and substantially understated his wealth on tax filings with the IRS to avoid exit taxes. Expatriation law requires that those with a net worth of more than $2 million pay taxes on their assets as if they were sold on the day before expatriation, but despite the value of his post-Initial Public Offering assets rising to above $1.1 billion, Tinkov claimed he did not have assets above $2 million. In addition, he did not report any gain from the constructive sale of his property worth more than $1.1 billion, causing a tax loss of nearly $250 million. A year after his expatriation, Tinkov was the 15th richest oligarch in Russia, with an estimated net worth of over $8 billion. 

    Tinkov was indicted in September of 2019 for willfully filing false tax returns following an investigation by CI agents, and he was arrested in February 2020. As part of his restitution, Oleg Tinkov paid $508,936,184, which is more than double the amount he sought to escape paying to the U.S. Treasury through renouncing his U.S. citizenship and concealing from the IRS large stock gains, which he knew were reportable. This payment includes $248,525,339 in taxes, statutory interest on that tax, and a nearly $100 million fraud penalty. 

    $1.3 billion tax shelter scheme

    IRS-CI’s primary resource commitment involves the investigation of tax crimes, which constitute over 70% of investigative time by CI agents. Resources are especially focused on unpacking complex structures that facilitate abusive tax schemes by wealthy individuals and corporations. 

    To take a recent example, in February 2022, a grand jury returned an indictment of seven individuals with conspiracy to defraud the United States and other crimes because of their promotion of fraudulent tax shelters involving syndicated conservation easements for at least two decades. The co-conspirators allegedly guaranteed a 4-to-1 tax deduction ratio to their clients and invoked various schemes to value easements as necessary to deliver the ratio promised. The indictment charged that these were abusive tax shelters lacking in economic substance and further contended that the defendants helped clients claim illicit charitable deductions after the conclusion of tax years through backdating documents. In total, the defendants allegedly sold over $1.3 billion in false and fraudulent tax deductions through their crimes. 

    Over the course of a four-year investigation, IRS-CI agents dedicated thousands of hours to unpacking the schemes these perpetrators allegedly facilitated to help their wealthy clients skirt tax obligations. These kinds of investigations involve incredibly complicated work for the CI team, as the tax shelters are often intentionally designed to impede the ability of the IRS to detect their fraudulent nature, including through appraisals that overinflate land values and fake votes among participants meant to create the illusion that the transactions are legitimate real estate investment opportunities and not abusive tax shelters. With additional resources and investigative support, IRS-CI could reduce the investigative time and ensure that criminals are held accountable quicker. 

    $3.6 billion of stolen cryptocurrency seized in FY 2021, a total already surpassed in FY 2022

    Over the last several years, CI has observed significant growth in the number of criminals using the cyber environment for fraud and illicit transactions. This criminality is made possible by an underlying technological ecosystem that facilitates remaining anonymous and eluding law enforcement while concealing financial transactions, ownership of assets, or other evidence. The possibility that these technologies will be deployed to facilitate sanctions evasion is also top-of-mind for CI investigators at present.

    In order to navigate this landscape, CI must deploy sophisticated blockchain analysis tools to unweave darknet transactions. For example, following the prosecution of Silk Road creator Ross Ulbricht in 2015 for several criminal counts, CI agents were tasked with the persistent investigation of stolen funds from this and other dark net marketplaces. As a result of their determined and resolute action, CI agents seized approximately $1 billion of Bitcoin in 2020. Finding these funds required the efforts of several CI agents and contractors, including the use of third-party analytic tools to trace assets to individuals who had hacked Silk Road to pocket illicit gains. 

    Even more recently, in February of this year, two individuals were arrested for laundering cryptocurrency stolen during a 2016 hack of a digital asset exchange. Thus far, $3.6 billion has been seized by CI agents who managed to track unauthorized transactions that sent stolen Bitcoin from this hack to digital wallets under the control of the launderers. The defendants allegedly employed numerous complex techniques to hide these funds, including automating transactions to quickly move funds and then deposit them into a variety of currency exchanges and darknet markets and withdrawing funds to break the chain of transactions and impeded detection. 

    Despite this complexity, today CI currently devotes only about six percent of its investigative time to cybercrimes/crypto currency, so it is just scratching the surface of the amount of criminal activity that is being detected.

     Budget picture IRS-CI has made remarkable progress in the last several years due to the commitment of extremely talented and dedicated agents. But it has done so without the resources in place to support its efforts. Since 2010, the CI workforce has decreased in size by approximately 25 percent, as the CI budget has only been able to accommodate reduced staffing levels as we are required to pay for labor budget increases (pay raises, benefit increases, etc.) by not backfilling attrition. Figure 1: IRS CI staffing over time

    The bleak budget picture has had a material impact on the ability of the CI team to pursue enforcement actions. At the end of this fiscal year, CI expects to have fewer than 3,000 employees. In order to meet its investigative needs, CI needs to grow by more than 40 percent by hiring at least 2,500 additional employees in the next five years (net gain of 1,300 after attrition). Building up the CI workforce along these dimensions would enable CI to reach its target level of criminal tax prosecution recommendations (around 1,600 per year), which would impact voluntary compliance substantially as it would deter sophisticated actors from complicated tax fraud and money laundering schemes, knowing that a larger and stronger investigative team stands ready to pursue misdeeds. 

    The table below provides a breakdown of the hiring needs of the CI unit. Note that these include only the employees associated with investigations and supporting staff and not additional needs for IT and data support. IT needs include securing licenses for data access for high-risk frontier and emerging markets, which today are substantially lacking. As one example, IRS CI today has only five agents who can access Sayari, a tool that allows for access to local government databases across the world in dozens of languages and jurisdictions and will help to identify Russian-based actors who attempt to illegally evade sanctions and facilitate financial movement of funds. 

     

    FY23

    FY24

    FY25

    FY26

    FY27

    NET GAIN FY23-FY27

     

     

    TOTAL Starting On-Rolls:

    2,995

    3,295

    3,575

    3,835

    4,078

     

    Special Agents

    2,197

    2,429

    2,648

    2,854

    3,048

     

    Less: 5.82% Attrition*

    128

    141

    154

    166

    177

     

    Add: Hiring

    360

    360

    360

    360

    360

     

    Special Agent Total:

    2,429

    2,648

    2,854

    3,048

    3,230

    1,033

    Professional Staff

    798

    866

    927

    982

    1,031

     

    Less: 10.29% Attrition*

    82

    89

    95

    101

    106

     

    Add: Hiring

    150

    150

    150

    150

    150

     

    Professional Staff Total:

    866

    927

    982

    1,031

    1,075

    276

    TOTAL Ending On-Rolls:

    3,295

    3,575

    3,835

    4,078

    4,305

    1,310

    * Based on a 10-year attrition average

     

     

    Maintains a professional staff to SA ratio of 30%

     

     

    Table 1: Workforce needs for CI

     Return on CI investments

    Even before deterrent effects are factored in, historical analysis makes clear than at an average in $1.8 million annually in tax deficiency is identified by IRS-CI per special agent, such that the ratio of tax deficiency to labor cost is 8:1. These estimates do not consider revenue from non-tax investigations. To get a rough sense of magnitudes, consider that IRS-CI last year identified $10.4 billion from tax fraud and financial crimes, with a budget of just $636 million. That is more than a 16:1 return. Additional resources to the IRS will thus produce very significant direct gains in that more agents means fewer dollars in the hands of criminals. Beyond illicit proceeds identified, CI agents successfully worked to convict more than 1,200 sophisticated financial criminals. 

    • Conclusion

    IRS-CI agents have unparalleled experience in tracking how financial assets change hands and deploy state-of-the-art investigative tactics to tracing criminal behavior. Given this expertise, it is no surprise that CI has been called on to dedicate resources to the Kleptocapture task force convened to hold Russian oligarchs accountable for potential schemes to evade sanctions or launder money. These efforts fit in to CI’s broader objectives of persecuting wealthy tax evaders and financial criminals who deploy sophisticated techniques to reap billions in illicit gains each year. 

    Given the magnitude of the challenge it faces, it is imperative for CI to be adequately funded to investigate and prosecute criminals. Today, it is not—the workforce of CI has shrunk by 25% over the course of the last decade, which is consistent with diminishing resources across the agency that have impeded the IRS’ ability to serve American taxpayers and enforce the law. CI, like the rest of the IRS, is in desperate need of stable, long-term funding to develop a deeper understanding of the global financial landscape and trace and seize assets that today are in the hands of criminals. This is work that the IRS is well-equipped to do—once it has the resources to do it.


  • 16 Mar 2022 1:11 PM | Anonymous

    WASHINGTON - The Internal Revenue Service today urged people to stay resolute against ongoing scams and schemes by properly securing computers, tablets and phones. Solid cybersecurity protection and scam recognition is vital to reduce the threat of identity theft inside and outside the tax system.

    The IRS works closely with the Security Summit, a partnership with state tax agencies and the private-sector tax industry, to help protect taxpayer information and defend against identity theft. Taxpayers and tax professionals can take steps to help in this effort by doing things like minimizing cybersecurity footprints and recognizing common scams and schemes.

    Below are 10 tips to help minimize exposure to fraud and identity theft:

    • Safeguard personal data. Provide a Social Security number, for example, only when necessary. Only offer personal information or conduct financial transactions on sites that have been verified as reputable, encrypted websites.
    • Protect personal information. Treat personal information like cash – don't hand it out to just anyone. Social Security numbers, credit card numbers, bank and even utility account numbers can be used to help steal a person's money or open new accounts.
    • Use strong passwords. Use a password phrase or series of words that will be easy for you to remember. Use at least 10 characters; 12 is ideal for most home users. Mix letters, numbers and special characters. Try to be unpredictable – don't use names, birthdates or common words. Don't use the same password for many accounts and avoid sharing them. Keep passwords in a secure place or use password management tools.
    • Set password and encryption protections for wireless networks. If a home or business Wi-Fi is unsecured, it allows any computer within range to access the wireless network and potentially steal information from connected devices. Whenever it is an option for a password-protected account, users should also opt for a multi-factor authentication process. Multi-factor authentication is critical to protecting your password.
    • Avoid phishing scams. The easiest way for criminals to steal sensitive data is simply to ask for it. IRS urges people to learn to recognize phishing emails, calls or texts that pose as familiar organizations such as banks, credit card companies or even the IRS. Keep sensitive data safe and:
    Be aware that an unsolicited email with a request to download an attachment or click on a URL could appear to come from someone that you know like a friend, work colleague or tax professional if their email has been spoofed or compromised.
    Don't assume internet advertisements, pop-up ads or emails are from reputable companies. If an ad or offer looks too good to be true, take a moment to check out the company behind it.
    Never download "security" software from a pop-up ad. A pervasive ploy is a pop-up ad that indicates it has detected a virus on the computer. The download most likely will install some type of malware. Reputable security software companies do not advertise in this manner.
    • Use security software. An anti-virus program should provide protection from viruses, Trojans, spyware and adware. The IRS urges everyone to use an anti-virus program and always keep it up to date. Set security software to update automatically so it can be updated as threats emerge.
    • Educate those less experienced about online safety. Children and those with less online experience may not be fully aware of the perils of opening suspicious web pages, emails or documents. Teens and younger users can put themselves at risk by leaving a trail of personal information for con artists to follow.
    • Back up files. No system is completely secure. Copy important files, including federal and state tax returns, onto removable discs or back-up drives and cloud storage. Store discs, drives and any paper copies in secure, locked locations.
    • Know the risk of public Wi-Fi. Connection to public Wi-Fi is convenient and often free, but it may not be safe. Hackers and cybercriminals can easily steal personal information from these networks. Always use a virtual private network when connecting to public Wi-Fi.
       
    • Review ID Theft Central. Designed to improve online access to information on identity theft, it serves taxpayers, tax professionals and businesses.

    The IRS doesn't initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. Generally, the IRS first mails a paper bill to a person who owes taxes. In some special situations, the IRS will call or come to a home or business.

    People should be alert to scammers posing as the IRS to steal personal information. There are ways to know if it's really the IRS calling or knocking on someone's door.

    Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it's needed at home, at work or on the go.

    This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.


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is a 501(c)6 non-profit organization.

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