After a success overseas in uncovering U.S. assets hidden in Swiss Banks. The Internal Revenue Service, has assigned a new team to investigate the cryptocurrency market and the individuals whom are associated.

Currently, investigators are undergoing changes to optimize their cases against tax evaders using cryptocurrency. Though the agency hasn’t charged anyone yet, cases are soon to come due to the tightening of rules around the world and the U.S.

The Securities and Exchange Commission has formed a joint team alongside, to combat potential fraud, which has put companies and investors that sell digital currency illicitly under the radar. Due to these new Blockchains that are online ledgers that record transactions in virtual currencies, which are either public or private. People can store these digital wealth’s secretly and serve as a banker for themselves.

Unknowing to the market of cryptocurrency investors, the IRS criminal agents have been on over watch of these cryptocurrency markets and trades since 2013. The IRS studied the use of cryptocurrency to avoid taxes, by moving money in and out of offshore accounts. This team was able to create a legal summons seeking the identities of all customers of Coinbase Inc., which is currently one of the largest virtual currency exchanges today.  As the summons was granted recently, Coinbase Inc., is required to produce the names, birthdates, addresses, tax id numbers and all other information for all accounts with transactions in excess of $20,000.

“That more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of Bitcoin in a given year suggests that many Coinbase users may not be reporting their Bitcoin gains,” U.S. Magistrate Judge Jacqueline Scott Corley wrote. “The IRS has a legitimate interest in investigating these taxpayers.”

With that, the IRS was able to gain knowledge on the activities of these individuals and have “reasonable basis” that these Bitcoin users weren’t paying there taxes on these virtual currencies.

Now the agents who cracked down on Coinbase Inc., Are cracking down on individuals who gained these excess profits and auditing these cryptocurrency gains. It can be quite misconstrued how one accounts for these virtual currencies, there are accountants everywhere trying to find the correct formula and processes to account these. At Covault, we have an expertise in accounting these crypto-basis from the beginning deposit to the end withdraw of these either gains or losses.