US Court Authorizes IRS to Issue Summons for Crypto Investors’ Records – The United States Department of Justice (DOJ) said Thursday that the Internal Revenue Service (IRS) secured a court order authorizing summons for records linked to U.S. taxpayers who failed to disclose and pay taxes on cryptocurrency transactions.
On September 22, U.S. District Judge Paul G. Gardephe issued an order authorizing the IRS to issue a so-called John Doe summons requiring M.Y. Safra Bank to produce information about U.S. taxpayers who may have failed to report to the IRS, and pay taxes on, cryptocurrency transactions, according to the DOJ, noting: “Specifically, the IRS summons seeks information about customers of SFOX, a cryptocurrency prime broker, who used banking services that M.Y. Safra Bank offered to SFOX customers engaged in cryptocurrency transactions.”
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According to the DOJ, SFOX is a cryptocurrency dealer and trading platform with over 175,000 registered users who have transacted cryptocurrencies worth more than $12 billion since 2015. IRS investigations have revealed that at least ten US taxpayers engaged in crypto transactions on the SFOX platform but failed to report those transactions to the IRS as required by law.
A John Doe summons, according to the tax authority, is one that does not identify the person against whom the summons is issued. Taxpayers must record any profits or losses from cryptocurrency transactions on their tax returns. The IRS, on the other hand, stated that “experience has revealed serious tax compliance problems relating to cryptocurrencies and other digital assets.”
IRS Commissioner Charles P. Rettig stressed: “The government’s ability to obtain third-party information on those failing to report their gains from digital assets remains a critical tool in catching tax cheats.”
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U.S. Attorney Damian Williams opined: “The government is committed to using all of the tools at its disposal, including John Doe summonses, to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share.”
