In a recent announcement by IRS Commissioner Charles Rettig and U.S. Attorney Damian Williams, U.S. Judge Paul Gardephe granted the IRS permission to issue a “John Doe summons.” The term is used when the IRS looks into unidentified taxpayers.
In doing so, the M.Y. Safra Bank is required by the summons to provide knowledge regarding taxpayers who may have failed to record and pay taxes on their cryptocurrency transactions.
In 2019, the New York-based bank partnered with the cryptocurrency exchange sFOX, to provide sFOX users with access to cash-deposit bank accounts. According to reports, the IRS has located at least ten sFOX users who allegedly violated the law by failing to declare their cryptocurrency transactions.
The IRS is reportedly paying close attention to SFOX users, according to the announcement.
In a statement, U.S. Attorney Williams said that taxpayers who use cryptocurrencies “should understand that income and gains from cryptocurrency transactions are taxable,” and that the details requested by the summons “will help to ensure that cryptocurrency owners are complying with tax laws.”
IRS Mass Hires
The U.S. is working to ensure that the IRS can collect a cryptocurrency tax as the crypto community expands and trade volumes reach new highs. The M.Y. Safra Bank is just the latest of the attempts to do so.
News of the summons comes as the IRS opens 87,000 new job openings due to President Joe Biden’s recent signing of the Inflation Reduction Act into law, giving the IRS access to approximately $80 billion in additional funding.
The 87,000 agent hiring spree would double the current size of the IRS.
According to the publication Finance Monthly, taxpayers should prepare for new rules, updated regulations, and increased scrutiny as U.S. lawmakers work to normalize and control the “Wild West” of cryptocurrency. The IRS estimates the agency has failed to collect crypto taxes by approximately $50 billion annually.
Cryptocurrency Taxes In The U.S. At Large
The M.Y. Safra Bank summons isn’t the first time the U.S. government has looked into possible tax evasion from cryptocurrency users. In 2017, judges authorized the IRS to serve the cryptocurrency exchange Coinbase with a “John Doe” summons as well. As a result, the business was forced to disclose data on almost 14,000 of its users.
Additionally, in April of last year, Courts once more issued “John Doe” summonses to cryptocurrency exchanges Kraken and Circle, the creator of the stablecoin USDC.
An EY Financial Services specialist, Thomas Shea, shared his thoughts on the taxation of crypto assets, stating, “There is new legislation that will require reporting for at least some crypto transactions, and when those rules go into effect, there will be significant changes,”