IRS Exodus: Top Brass Flee as Crypto Tax Rules Crumble

Washington’s tax enforcers are jumping ship—just as the crypto industry outmaneuvers their outdated rulebook.

The revolving door spins: Three senior IRS crypto leads quit in Q2 2025, leaving gaping holes in enforcement. Meanwhile, DeFi protocols keep rewriting the playbook with privacy-preserving swaps that leave auditors chasing ghosts.

Regulatory whiplash: Yesterday’s ’taxable event’ is today’s loophole after last month’s court ruling on wrapped tokens. Treasury scrambles to patch policies while crypto OGs smirk—another case of bureaucrats bringing knives to a smart contract fight.

Bonus jab: At least the IRS finally found something it can’t seize—decentralized governance tokens. Maybe they’ll audit DAO treasuries next (good luck serving subpoenas to a multisig).

Efforts in Cryptocurrency Taxation

Wilks, previously with TaxBit, and Mukherjee, from ConsenSys and BinanceUS, joined the IRS Crypto Asset Initiative in February 2024. They were tasked with developing tax reporting, compliance, and audit programs while coordinating with the sector. Last summer, the 1099-DA form was introduced to aid tax reporting for cryptocurrency transactions.

The resignations came as both executives voluntarily accepted offers extended to federal employees. Following their decisions, an administrative leave with pay was initiated, during which they will remain with the IRS for a few more months.

The IRS’s Downsizing

Both executives were also involved in formulating tax rules targeting the crypto sector. Efforts were made to enhance reporting systems and foster collaboration with the industry, aiming for more effective management of tax processes related to crypto transactions.

Previously, under the Biden administration, a rule requiring data collection from intermediaries in decentralized finance was introduced. However, this was nullified by a joint resolution signed during the Trump era, thus eliminating such tax rule enforcement and data collection practices.

As part of its new strategy, the IRS continues to address gaps in crypto asset taxation. Plans to reorganize personnel numbers and redistribute tasks are underway, with over 20,000 federal employees participating in the resignation program. This will influence the IRS’s approach to crypto asset strategy until comprehensive measures are reintroduced by Trump.

These developments indicate that uncertainties and regulatory steps in digital asset taxation could significantly impact both the industry and tax applications in the future. The IRS’s structural adjustments aim to strengthen compliance and audit processes in digital asset taxation.