Just last week, the IRS announced that the agency would bring on two “private-sector experts” to assist with efforts in cryptocurrency and digital assets.
The focus appears two be two-fold, given that one expert is a practicing attorney, while the other is a CPA. Both have experience in both tax and crypto, and are charged with helping to lead the charge when it comes to the IRS’s goal of building reporting, compliance, and enforcement programs for cryptocurrency and the digital asset economy.
Sulolit “Raj” Mukherjee, JD
Sulolit “Raj” Mukherjee, JD has been described by Forbes as “one of the cryptocurrency industry’s foremost experts on tax policy.” He’s been a tax executive for over 10 years, mostly focused on compliance, and from the looks of his resume and history with crypto and blockchain, he seems fit for the role.
Mukherjee has served as Global Head of Tax at ConsenSys, Vice President, Global Head of Tax, and Senior Director, Tax at Binance.US. He also served as co-chair of the Tax Working Group at Blockchain Association, and worked at Coinbase as the Global Head of Tax Information and Reporting. He was also chair of the Tax Information Reporting Working Group at the Blockchain Association. Most of his previous work was in tax compliance within the finance industry.
According to Forbes, his “vast knowledge of decentralized exchanges will be valuable in this new role,” describing him as having a 360-degree view of tax policy at a global scale.
Seth Wilks, CPA
Seth Wilks, CPA, has served as TaxBit’s Vice President of Government Relations, and in 2020 was a panelist for the IRS’s Virtual Currency Summit. According to The Block, he’s spent the past six years working in “the digital policy space, and prior extensive work ‘with tax compliance and planning issues related to multinational corporations and manufacturing.'”
What the IRS Says About This Addition
Danny Werfel, the current IRS Commissioner, had this to say about the move:
“This is a complex and evolving sector that has major tax administration implications. It’s important we get this right for taxpayers and the nation. Pulling in expertise from the private sector to work with the IRS team is critical to successfully building the agency’s efforts involving digital assets and helping us do it in a way that works well for everyone.
While Doug O’Donnell, IRS Deputy Commissioner, Services and Enforcement, said:
“Seth and Raj expand our ability to understand this sector while designing systems for reporting of cryptocurrency and digital assets and related transactions. Improving employee capacity and access to tools in this rapidly evolving global landscape is a top IRS priority.”
What Does This Mean for the Future of Cryptocurrency Tax and Accounting?
For one, this certainly signals that the IRS is ramping up its efforts to ensure cryptocurrency tax compliance and reporting. Even though crypto is still evolving, most tax professionals (our crypto team included), expects there to be a lot more scrutiny in 2024 and beyond, with more regulation and requirements on the horizon.
One attorney and senior manager at Baker Tilly told NBC that, “Everybody’s been waiting for the tidal wave of this enforcement activity.” The same article noted a rise in crypto and digital currency tax investigations by the IRS’ crime unit, specifically as part of their goal to reverse low audit rates for high-income earners and corporations.
According to Cointelegraph, the IRS did backtrack on a law requiring U.S. businesses to immediately report crypto transactions above $10,000, but the IRS did announce it plans to implement the rule and with it, a regulatory framework.
This is also after IRS Crypto Division Chief Jim Lee stated that the IRS Criminal Investigations Unit has seen an increase in cases regarding crypto, ranging from not reporting capital gains to withholding ownership disclosures. This is quite the change from a few years ago, when Lee stated that most criminal crypto cases were the result of money laundering. Half of cases, he has said, are now tax related.
It’s not really new news that the IRS is trying to build its crypto framework and catch up to the tech-savvy of the industry. Whether having “friends” of the industry in with the IRS team will be ultimately helpful, well… it’s simply too soon to say.
