The US Department of Justice took action for the first time to evade taxes on $4 million worth of Bitcoin transactions, sparking heated discussions in the crypto community
Written by: TaxDAO
Related news: Early Bitcoin investors sued for false declarationscryptocurrencyProceeds sentenced
Author: Office of Public Affairs. US Department of Justice
Frank Richard Ahlgren III, a Texas man, was sentenced to two years in prison for filing a false tax return that underreported $3.7 million in Bitcoin capital gains. Ahlgren was an early investor in Bitcoin and used various means to conceal profits from Bitcoin transactions between 2017 and 2019, including falsely reporting purchase prices and using tools such as mixers to cover transactions. In the end, Ahlgren was convicted of tax evasion totaling more than $1 million.
According to court documents and court statements, Frank Richard Ahlgren III filed false tax returns that underreported or failed to report the substantial gains from the sale of $4 million worth of Bitcoin. However, under U.S. tax law, all taxpayers must report any sales income, actual gains or losses from the sale of cryptocurrencies such as Bitcoin on their tax returns.
Algren is an early investor in Bitcoin. He started buying Bitcoin in 2011. In 2015, he bought 1,366 Bitcoins through Coinbase. In October 2017, he sold 640 Bitcoins for a profit of $3.7 million and purchased a house in Utah. When filing his 2017 income tax return, he submitted a false income summary, exaggerating the purchase price of Bitcoin and underreporting capital gains. In 2018-2019, he sold another $650,000 worth of Bitcoin but did not file a tax return. In order to conceal the transactions, Algren adopted a variety of complex means over the years, trying to use multiplewalletBy moving bitcoins, conducting offline bitcoin cash transactions in person, and using mixers designed to conceal who was doing the transactions, Algren was calculated to have evaded taxes totaling $1 million on bitcoin.
The case is the first criminal tax evasion case in the United States that centers entirely on cryptocurrency. U.S. Justice Department tax officials said Algren was convicted of hiding his Bitcoin earnings and attempting to cover upBlockchainThe head of the IRS Criminal Investigation Bureau emphasized that they have professional capabilities to track cryptocurrency transactions and pointed out that tax evasion will be subject to legal sanctions regardless of the form of currency used.
In addition to the two-year prison sentence, U.S. District Court Judge Robert Pitman of the Western District of Texas sentenced Algren to one year of supervised release and ordered him to pay $1,095,031 in restitution to the U.S. government.
TaxDAO Comments:
Before this case, cryptocurrency tax evasion was often "mixed" with other tax violations, but this time the U.S. Department of Justice (DOJ) prosecuted cryptocurrency tax evasion alone, making this the first criminal tax evasion case in the United States that revolves entirely around cryptocurrency. This case reminds cryptocurrency investors that while making money, they should also always pay attention to tax compliance risks.
Cryptocurrency tax evasion case first reported
Prior to this, although cryptocurrency transactions have been included in the tax supervision scope of the IRS, cryptocurrency tax evasion is often prosecuted together with other illegal and criminal acts. For example, in the Bruno Block case and Bitqyck case that have been sentenced before, the prosecutors mainly accused the persons involved of securities fraud and other behaviors, and did not specifically focus on tax evasion. The Algren case is the first criminal tax case in the United States targeting cryptocurrency alone, which indicates that the United States will have stricter supervision on cryptocurrency tax compliance in the future. Cryptocurrency investors need to pay more attention to the tax compliance of related transactions and income, and be careful not to be subject to tax penalties and suffer unnecessary losses.
Falsely reporting cryptocurrency gains can cost as much as intentional injury
In the United States, tax evasion is explicitly classified as a felony. According to 26 USC 7201, anyone who intentionally attempts to evade or avoid taxes may be sentenced to up to five years in prison, a fine of up to $100,000 (or up to $500,000 for a company), or both, provided that the back taxes are paid.Xiaobai NavigationIn the United States, criminals who cause serious harm to others (Aggravated Assault) may be sentenced to more than five years in prison, which also means that the United States believes that the harm of tax evasion is only slightly less than seriously injuring others.
“Invisible” transactions can also be tracked
The characteristics of decentralization and anonymity are the core charm of cryptocurrency, but this does not mean that cryptocurrency transactions can evade tax supervision. In order to enhance regulatory capabilities, law enforcement agencies may take a variety of anti-anonymity measures, such as using data analysis technology to identify abnormal transactions, strengthening information sharing and cooperation with international financial institutions, and developing monitoring tools for emerging payment methods to ensure the transparency and compliance of financial activities. At the same time, relevant departments may also adoptBlockchainAnalytical tools trace cryptocurrency transactions andwalletIn addition, the U.S. Treasury Department and the Internal Revenue Service have passed the Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions Act, which requires cryptocurrency brokers to report their customers’ cryptocurrency sales and transactions from January 1, 2025, which further limits the space for concealing cryptocurrency proceeds.
Cold thinking on hot topics: the tax system is not inherently perfect
While this case has sparked heated discussions, it has also prompted us to reflect on the US cryptocurrency tax system itself. That is, there may be some ambiguities in the US cryptocurrency tax system itself, and the tax burden borne by individual investors may be too heavy. Has this deficiency in system design also led to cryptocurrency tax evasion to some extent? The cryptocurrency tax systems of various countries are still in the exploratory stage, and the United States is no exception. The current US tax system cannot clearly guide investors on how to accurately report and pay cryptocurrency.exchange得税，遑论阿尔格伦刚开始投资比特币之际。例如，在加密货币交易中，如何准确计算购买成本是一个长期存在的问题。由于加密货币的价格波动性极大，投资者在购买时可能采用不同的交易方式，如分批购买、通过不同平台或使用不同支付方式。这些因素导致了计算实际购买成本的复杂性。现有税务框架对如何处理这些价格波动和交易方式缺乏清晰的规定，尤其是对于普通投资者而言，他们往往没有足够的专业知识来理解如何正确计算每笔交易的成本基础。此外，税务局的税务指南通常建立在传统资产交易模式之上，而未能充分考虑到加密货币的特性，例如跨境交易、交易所间的费用差异、以及使用混币器等隐私工具的情形。这种缺乏明确指引的现状，容易导致投资者在申报时发生误差，从而引发税务合规风险，甚至可能导致漏税和避税行为。对于税务机构而言，现有的模糊标准也增加了税务审查的难度，使得监管工作面临更大的挑战。
In addition, cryptocurrency transactions involve cross-border and anonymous transactions, and tax collection itself is technically and operationally difficult. The active cooperation of taxpayers is conducive to reducing the collection cost. At this time, if the government still imposes strong supervision and high tax burden on cryptocurrencies, it may force taxpayers to passively declare taxes, or even evade or avoid taxes. Perhaps, compared with Algren's personal illegal behavior, what deserves more attention is the soundness of the tax regulatory framework.
Tax risks cannot be left to chance, compliance is the solution
Although paying taxes according to law is a basic responsibility of citizens, we should also urge legislators to design clearer tax rules and more appropriate tax levels to avoid letting excessive tax burdens hinder the development of the cryptocurrency market.CommunityThe importance of tax compliance should also be understood and respected. The goal of tax compliance is to make the cryptocurrency market healthier and more transparent and promote its long-term development, rather than getting caught up in endless legal disputes and policy conflicts. In particular, as the United States and other countries continue to improve the cryptocurrency regulatory framework and combat money laundering and terrorist financing, the legitimacy of the source of cryptocurrency is becoming increasingly important, and complete tax receipts are a strong proof of the legitimacy of the source of assets. From this perspective, current tax compliance is closely aligned with the long-term property interests of cryptocurrency investors.
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