The Internal Revenue Service (IRS) obtained a “court order authorizing the summons of records relating to a U.S. taxpayer who failed to report cryptocurrency transactions and pay taxes. “The IRS Commissioner commented that ” The government’s ability to obtain third-party information about those who fail to report gains from digital assets continues to be an important tool in catching tax fraudsters.”
IRS Seeks Crypto Investor Records from Banks
The U.S. Department of Justice (DOJ) announced Thursday that the Internal Revenue Service (IRS) has obtained a “court order authorizing the summoning of records relating to U.S. taxpayers who fail to report cryptocurrency transactions and pay taxes.”
U.S. District Court Judge Paul G. Gardephe issued an order on September 22 “authorizing the IRS to issue a so-called John Doe summons requiring M.Y. Safra Bank to report cryptocurrency transactions to the IRS and produce information about U.S. taxpayers who may have failed to pay taxes. The order “authorizes the IRS to issue the summons,” the DOJ notes in detail.
Specifically, the IRS summons seeks information about the use of banking services provided by M.Y. Safra Bank by clients of SFOX, a cryptocurrency prime broker, who engage in cryptocurrency transactions.
SFOX is a cryptocurrency dealer and trading platform with over 175,000 registered users who have collectively traded over $12 billion worth of cryptocurrencies since 2015, according to the DOJ.
The IRS investigation identified at least 10 U.S. taxpayers who conducted crypto transactions on the SFOX platform but failed to report those transactions to the IRS as required by law. Tax authorities explained that the John Doe summons is a summons that does not identify the person for whose liability the summons was issued.
Taxpayers are required to report gains and losses related to cryptocurrency transactions on their tax returns. However, the IRS states that “experience to date has demonstrated a significant lack of tax compliance related to cryptocurrencies and other digital assets.”
IRS Commissioner Charles P. Rettig emphasized.
The government’s ability to obtain third-party information about people who do not report gains from digital assets remains an important tool in catching tax cheats.
U.S. Attorney Damian Williams weighed in.” The government is committed to using all the tools at its disposal, including the John Doe summons, to identify taxpayers who understate their tax liability by not reporting cryptocurrency transactions and to ensure that everyone pays their fair share.”
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