IRS Faulted Over Crypto Seizure Records — Here’s What to Know

Key Points

1. The IRS Criminal Investigation (IRS-CI) had custody of around $8 billion in digital assets tied to open investigations as of late 2023 but failed to consistently document seizures properly.

2. The Treasury Inspector General for Tax Administration (TIGTA) found that IRS-CI lacked basic documentation, including memos for all seizures, and some assets were incorrectly swapped or misplaced.

3. A Litecoin-to-Bitcoin swap and a decimal error led to undervaluation of seized assets, with one Bitcoin holding undervalued by over $9,000.

4. TIGTA issued six recommendations to improve inventory systems, clarify guidelines, and enforce documentation timelines, with the IRS agreeing to five and partially accepting one.

5. The report also noted that 43% of seized crypto assets were listed in the wrong location in the IRS's inventory system.