In brief

  • The IRS spent $250,000 on a contract with Blockchain Analytics and Tax Services LLC.
  • Reportedly, the contract is unrelated to recent requests by the IRS for privacy coin tracing tools.
  • The agency recently sent out letters to cryptocurrency holders about unpaid taxes.

The United States Internal Revenue Service’s (IRS) eye on cryptocurrency has grown over the last couple years, and in recent months the government agency has both spent money on cryptocurrency tracing tools and put out a call for additional ones.

Today, we learned that the IRS has dropped nearly $250,000 on a contract with a relatively unknown firm, Blockchain Analytics and Tax Services LLC. The contract began yesterday. While details are thin on the extent of the arrangement, SAM.gov, which makes federal contract details public, notes that it’s for a 12-month subscription for 120 users.

As noted by CoinTelegraph, the firm’s only previous contract with the United States government is a $9,800 fee from the United States Treasury for serving as an expert witness.

Just last week, the IRS’ Criminal Investigations unit put out a fresh call for firms developing tracing tools for privacy-centric coins such as Monero, as well as Layer 2 transaction protocols such as Bitcoin’s Lightning Network. It’s a more robust version of a similar request that the IRS issued back in July. An agency representative tells CoinTelegraph that this new contract is unrelated to that request.

Earlier this summer, it was discovered that cryptocurrency exchange Coinbase was set to secure contracts with both the IRS and Drug Enforcement Administration (DEA) for access to its Coinbase Analytics tracing tools. Many members of the crypto community were not thrilled with the news.

Additionally, in August, the US Department of Justice announced it had seized millions of dollars’ worth of Bitcoin from terrorist organizations—actions that the IRS’ Criminal Investigations group aided.

But the agency’s crypto-centric actions aren’t only happening behind the scenes. Just recently, the IRS released the draft 2020 form for individual tax returns, revealing that the general question about interactions with cryptocurrency—“At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”—would be moved to the very first page of the return. Previously, it was found on a later page that not all users would even need to fill out or include.

Following that news, it was also revealed that the IRS had sent out another round of letters to US citizens suspected of not paying taxes on their cryptocurrency transactions. The agency previously did the same in 2019, sending out more than 10,000 such letters.