Famed ‘Silk Road’ IRS Agent Now Aims at Unreported Crypto Gains

IRS Agent Gary Alford vs crypto

Gary Alford, the famous IRS special agent who helped solving the ‘Silk Road’ case, recently spoke at a panel in New York hosted by global accounting firm EisnerAmper. On the panel’s agenda was the taxation ramifications of cryptocurrencies. In the Silk Road case, Alford played a pivotal role in taking down an online drug trafficking infrastructure which resulted in the 2013 arrest of kingpin Ross Ulbricht. He is now a cyber-crime coordinator for the IRS.

In his talk, Alford warned recreational Bitcoin investors who think they can evade taxes on their cryptocurrency gains. He said that his agency is now moving away from sensational money laundering cases and starting to focus on routine enforcement of tax law involving cryptocurrencies.

Alford was quoted saying at his talk:

“We already are aware that there were cases to be made, we just didn’t know if we were at the point where we can bring it for criminal prosecution. We believe we are at that point now. If we had 12 jurors and told them someone made all their money in bitcoin, we believe that they would understand.”

He made the case that usually the IRS is behind the curve on enforcing tax laws due to the rapidly-evolving tech industry. He argued that this is mainly due to the fact the law always lags behind technological advances. But, he stressed, the IRS is “ahead of the curve” this time. Furthermore, Alford said that juries are more crypto savvy. If you go in front of a jury and tell them the accused made the money off of Bitcoin, they are likely to understand what that means, he said.

People Sometimes Forget to Report their Cryptocurrency Gains

Alford also argued that because of the anonymity afforded by cryptocurrencies, it’s harder to pin down someone’s crypto assets. Most people completely forget about their crypto assets when they go to file their taxes.

“You might have bitcoin on everything, but when you go to your accountant, you say, ‘Oh, I’ve never heard of bitcoin.’ Really? Every date you’ve ever been on, that’s all you talked about was bitcoin, but somehow when your accountant asks you, you forgot to talk about it? That’s our burden to show this individual knew.”

According to data from the cryptocurrency exchange Coinbase, the IRS learned that more than 14,000 of the crypto exchange’s users either bought, sold, sent or received at least $20,000 worth of Bitcoin in a given year. However, out of those 14,000, only 800 taxpayers reported gains made through crypto assets. Alford said that the IRS is trying to raise that number significantly.

While the IRS is urging voluntary compliance, Alford warned that if the IRS can prove that a taxpayer willfully concealed cryptocurrency gains, they might be subject to prosecution. Recently, the IRS Commissioner asserted that the government agency will release crypto guidance soon.

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