Cryptocurrency investors are facing enhanced scrutiny from the Internal Revenue Service (IRS) in 2021. As a result, it is more important than ever for investors to ensure that they are complying with the Internal Revenue Code and other pertinent federal laws. We have published several resources for cryptocurrency investors prepared by New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group. If you have questions about federal tax compliance related to cryptocurrency, these resources are your starting point for what you need to know:

For many U.S. taxpayers who own foreign financial accounts, filing a Report of Foreign Bank and Financial Accounts (FBAR) and meeting the reporting requirements under the Foreign Account Tax Compliance Act (FATCA) are essential for avoiding unwanted scrutiny from the Internal Revenue Service (IRS). The IRS expects taxpayers to strictly comply with the FBAR and FATCA filing requirements—and to engage a New Jersey international tax lawyer to assist them when necessary. Recently, the IRS issued updated compliance guidance that all U.S. taxpayers with foreign financial accounts need to keep in mind.

The Internal Revenue Service’s Criminal Investigation Division (IRS CI) targets individual and corporate taxpayers suspected of criminal tax law violations. It investigates certain other types of criminal activity as well. If you have been contacted by IRS CI Special Agents, defending yourself (or your company) starts with engaging a New Jersey tax lawyer to determine why exactly you are being targeted.

The IRS has conducted relatively few audits in recent years. In 2019, the IRS audited just 0.45 percent of individual tax returns, down from 0.59 percent in 2018—and even further down from 1.11 percent a decade prior. But, as New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, this may change in 2021.

The IRS is prioritizing cryptocurrency tax compliance in 2021. In addition to sending warning letters to known cryptocurrency investors, the IRS is also seeking to identify investors who have failed to report their cryptocurrency investments on their federal returns. As New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, it is doing so through the use of what is known as a “John Doe” summons.