The U.S. Internal Revenue Service (IRS), a government agency responsible for collecting taxes and resolving instances of fraudulent tax filings, might begin subpoenaing giant tech corporations such as Apple, Microsoft, and Google.
During a recent cyber training program, organized by the IRS, the agency noted:
Issuance of a Grand Jury Subpoena should be considered for Apple, Google, and Microsoft for the Subject’s complete application download history.
Drafted by James Daniels, the Program Manager and Special Agent at IRS’ Criminal Investigation Unit, the presentation further mentioned:
Each application’s function should be explored to determine whether or not the application can transmit, or otherwise allow, transactions in bitcoin.
Identifying Peer to Peer and Business-related Crypto Transactions
Daniels further noted that applications that do permit cryptocurrency transactions should be carefully examined. He recommended checking whether the applications allow peer-to-peer (P2P) transactions or crypto-related transactions between businesses.
Laura Walter, a Certified Public Accountant (CPA) and former tax advisor at Ernst & Young, had leaked IRS’ crypto-related presentation on Twitter last week. Meanwhile, the IRS confirmed to Coindesk that the leaked documents had been prepared by the American tax collection agency.
IRS’ Crypto Presentation Delivered to Various Law Enforcement “Partner Agencies”
Justin Cole, Director of Communication and Education at IRS’ Criminal Investigation Branch, stated that the crypto-focused presentation was shared with the tax agency’s employees during an event held at the World Bank in Washington D.C.
He also mentioned that the presentation had been delivered to several other law enforcement “partner audiences.” He added that IRS’ most recent crypto-related discussion involved partners and press members from many different nations throughout the world.
No Confirmation Yet About IRS’ Plans
Notably, Cole did not confirm whether the IRS would be moving forward with its recommendations. He remarked:
I can’t discuss specific investigative actions that the agency may or may not take in the future.
According to presentation materials shared by Daniels, the IRS may ask for clarification or more details regarding crypto transactions from those who are familiar with the “financial habits of the Subject.”
These people may include friends, family members, and bank tellers of “the Subject (if feasible), and establishments the Subject frequents that may accept bitcoins.”
IRS May Already Be Tracking Individual and Business-related Crypto Transactions
As mentioned in the presentation materials, taxpayers’ social media accounts may be monitored to determine whether they are conducting cryptocurrency transactions. The IRS might also be tracking crypto transactions performed by merchants and various other businesses.
In order to carefully examine crypto transactions, IRS’ document suggests:
A Grand Jury Subpoena should also be considered for (and may already have been obtained during the normal course of the investigation) the Subject’s financial accounts, including, but not limited to, the Subject’s bank, credit card, and PayPal records.”
Identifying Crypto Wallet Addresses and Balances of Taxpayers
During its investigation, the IRS is planning to identify wallet addresses and account balances of individuals who might own bitcoin (BTC) or other cryptos. Companies that provide exchange or online wallets may be subpoenaed for customers’ crypto addresses and balances.
Wallet providers may also be asked to share “any identifying information” such as “any linked financial accounts, login times and information, correspondence, and transaction details.”
At present, the effectiveness of these procedures and requirements has not been “exclusively tested”, Daniels said. He also noted that it “may not be advised to send a Subpoena for records if not critically necessary.”
Moreover, individual taxpayers being investigated must not be subpoenaed because it “may be detrimental to the seizure of any bitcoin balance”, according to Daniels.
IRS’ Subpoena Powers May Apply in Civil and Criminal Cases
Lisa Zarlenga, Partner and Co-Chair of Tax Group at Steptoe & Johnson, a Washington D.C.-based law firm, explained that the IRS’ power to subpoena is applicable in criminal and civil cases.
Zarlenga, a former Tax Legislative Counsel at the U.S. Treasury Department, stated:
While this presentation was given by the criminal investigation unit and clearly indicates that criminal investigation will use that tool, there is nothing preventing the civil side from using it as well.
Zarlenga also clarified that the IRS must first inform taxpayers that it is planning to send subpoenas to companies or other third-parties (before actually sending them).
The IRS is currently preparing to release new guidelines on cryptocurrency tax collection requirements.