Open up, it’s the IRS. We’re here about the crypto tax you dodged

The IRS has been granted a court order to collect records from a bank the agency said will help it identify US taxpayers who failed to report taxable income from crypto trades. 

Uncle Sam yesterday said it’s specifically going after records from New York-based bank M.Y. Safra, which partnered with SFOX – a cryptocurrency prime broker – to offer the latter’s customers access to cash-deposit bank accounts. SFOX users could thus use funds at M.Y. Safra to buy and sell digital coins.

The IRS was granted a similar request against SFOX in August. Both organizations were served with “John Doe” summons, a tactic used by the IRS when it investigates wrongdoing without knowing the names of the accused taxpayers.

Basically, the IRS reckons people have profited from trading cryptocurrencies via SFOX and M.Y. Safra, and haven’t declared that income nor paid the required tax on it, and so the agency wants to chase those people down and strap them into the wallet-emptying ass-kicking machine.

“The John Doe summons directs M.Y. Safra to produce records that will enable the IRS to identify U.S. taxpayers who were customers of SFOX and who engaged in cryptocurrency transactions that may not have been properly reported on tax returns,” the agency said. 

According to the IRS, its probing into the world of cryptocurrencies has revealed “significant tax compliance deficiencies” across the industry, and that it “has strong reason to believe that many virtual currency transactions are not being properly reported on tax returns.” That said, there are many people who use cryptocoins for legit purposes, and pay due income taxes on it.

Per the IRS’s statement, SFOX has more than 175,000 registered users who have conducted more than $12 billion in transactions since 2015. The agency said it has identified “at least ten” – count ’em, ten – US taxpayers who have used SFOX but failed to report transactions. 

With the data it gathers from M.Y. Safra, the IRS said it expects to be able to match the identities of SFOX users with Safra services “which the IRS will then be able to use in conjunction with other information to examine whether these users complied with the internal revenue laws.” 

Damian Williams, US Attorney for the Southern District of New York, where the summons was granted, said that cryptocurrency transactions aren’t exempt from tax liability. “The government is committed to using all of the tools at its disposal … to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share,” Williams said. 

And another thing

Meanwhile, America’s Commodity Futures Trading Commission has filed and settled charges against blockchain outfit Ooki (formerly known as bZeroX) and its founders. 

The company and its pair of operators were collectively charged with illegal off-exchange asset trading, operating as unregistered futures commission merchants, and failing to adopt a customer identification program, as is required by the Bank Secrecy Act. 

The CFTC announced its settlement in the case along with the filing, stating that the respondents (the company and its two founders) will have to pay a $250,000 penalty, as well as promising to not to violate of the Commodity Exchange Act and CFTC regulations. ®

READ MORE HERE