While the adoption of cryptocurrency has grown over the years, the Internal Revenue Service (IRS) said that tax reporting has lagged. The IRS has recently clamped down on the USDC issuer, Circle to produce account registration details of some of its customers. In a recent report, the tax agency said that it aims to use Artificial Intelligence (AI) to find any crypto misconduct.
IRS Proposes to Use AI for Crypto Transaction Analysis
Based on its April 2 report, the Internal Revenue Service said it plans to digitalize operations in the fiscal year 2021. The move covers a transition from paper operations to the use of artificial intelligence (AI) and machine learning (ML) devices.
According to the tax agency, cryptocurrency trading profits are subject to capital gains taxes. This resolve was made by the agency in 2014 that cryptocurrency is a property for federal tax purposes. In essence, it means that the crypto trading profits will be treated similarly to stock-trading profits.
It also aims to deploy chatbots to track and monitor crypto transactions. The agency plans to use AI and ML to draw insights from cryptocurrency data.
IRS Clamps Down on Crypto Transactions
Recently, the IRS has been actively monitoring transactions from crypto service providers. The agency recently initiated a lawsuit against Circle, the P2P payments company and users of Kraken, a crypto exchange.
The agency requested the account activity records and other materials for customers with at least $20,000 in transactions ranging between 2016 and 2020. Although the IRS noted that it is not accusing Circle of any wrongdoings, however, it wants to see the records of those owing tax.
Following Circle’s case, the agency is also seeking customers record from another crypto exchange Kraken from 2016 to 2020. However, concerning this, the court responded that the agency has to narrow down the request.