IRS Executes Summons for Financial Records of Crypto Transactions
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The federal regulatory agency is asking for details from trading platform sFOX on users who engaged in at least $20,000 worth of transactions.
Federal regulators have taken steps to investigate how cryptocurrency gains may be taxed, as a federal court in California authorized the Internal Revenue Service to review transaction histories that were conducted on digital currency trading platform and dealer sFOX.
The Department of Justice confirmed on Tuesday that IRS officials are seeking information on U.S. taxpayers who engaged in at least $20,000 worth of cryptocurrency transactions on sFOX’s digital platform between 2016 and 2021.
“Taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable,” said Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division. “The information sought by the summons approved today will help to ensure that cryptocurrency owners are following the tax laws.”
The request was filed via a John Doe summons, a specific legal filing within the IRS to pursue potential unidentified violations of tax law.
Officials at the DOJ note that there is no formal complaint that sFOX has violated U.S. tax code, and the John Doe summons will require the company to produce records to confirm no violations have occurred by sFOX customers engaging in digital currency transactions.
This is the latest step federal agencies have taken in relation to assessing the digital asset market, as it continues to grow with no formal regulations. A slew of legislation has been introduced on Capitol Hill directing the federal government to impose more restrictions and oversight on the industry.
Some of the concerns lawmakers have voiced revolve around cryptocurrency’s inherent anonymity, which can aid financial crimes like tax and sanction evasion. It also helps hide the identities of cyber criminals who target corporations with ransomware and demand payment in cryptocurrency.
“Because transactions in cryptocurrencies can be difficult to trace and have an inherently pseudo-anonymous aspect, taxpayers may be using them to hide taxable income from the IRS,” Justice officials noted.
Back in 2016, the IRS sought similar user information from popular crypto trading platform Coinbase, asking for information on roughly 13,000 users who were recorded as having traded over $20,000 in digital currencies within a single year, between 2013 and 2015.