The IRS screens major crypto brokers for potential tax evaders

The IRS screens major crypto brokers for potential tax evaders

Stock image of bitcoin and tax forms

Another day, another crypto scandal. The Southern District of New York has authorized the IRS to search the records of (should) American taxpayers who are clients of SFOX encryption broker. the new IRS summons Particularly targeted is MY Safra Bank, a New York-based financial institution that offers SFOX users with bank accounts for cash deposit.

There are about 175,000 SFOX users who have collectively participated in more than $12 billion in crypto transactions since 2015, according to press release From the Southern District of New York we aHey ttorney’soffice. The IRS believes that many of these investors have foregoed their tax payments. The agency noted that it had previously identified at least ten SFOX customers who failed to report their transactions.

From the press release:

Based on its recent experiences with cryptocurrencies, the IRS has strong reason to believe that many virtual currency transactions are not properly reported in tax returns. Among other reasons, there is no third party reporting to the IRS regarding these transactions, and the summons filed against other cryptocurrency traders revealed a significant under-reporting of such transactions.

This is not the first time that the IRS has opened an investigation into a major crypto trader. California court authorized the investigation In Kraken records in May 2021. The state of Massachusetts has approved the search At Circle Investors last year too. Back In 2017, Coinbase faced thatown visit from taxes.

In each case, a “John Doe summons” was issued to the IRS which essentially amounted to a blank investigative check. The agency does not need to know the identity World Health Organization They’re looking for it at first, just what or what are looking for (ie tax evasion). With SFOX’s user base, the agency maintains its search for the subset of investors who hold $20,000 or more in annual crypto exchanges, looking at records from January 1, 2016 to December 31, 2021.

“The IRS anticipates that in response to John Doe’s summons, MY Safra will be able to provide information about identities and cryptocurrency transactions to SFOX users who have also used MY Safra’s services — which the IRS will then be able to use along with information to examine whether These users have complied with Internal Revenue laws,” the New York Attorney General’s office explained.

In announcing the new SFOX investigation, officials made sure to remind everyone that “taxpayers who deal in cryptocurrency are required to report any gains and losses associated with their tax returns.”

However, the crypto brothers have been doing their best to ignore the IRS for years, reaping the benefits (or consequences) of the largely unregulated industry. In 2018, for example, Less than 100 people Using the popular tax filing software Credit Karma, report Bitcoin holdings in annual tax returns as of that year’s tax day. According to the IRS, 802 people only Bitcoin dividends were reported in 2015. Still, in 2022, an estimated half of all cryptocurrency investors do not pay their taxes, according to analysis From Barclays plc.

As the press release summed up, “The IRS experience shows significant shortcomings in tax compliance with regard to cryptocurrencies and other digital assets.” And now it looks like the crackdown may finally be coming. On top of the multiple IRS sensors, the a presidential batch For regulation, the Securities and Exchange Commission is also digs in. Just last week, the committee chair indicated that the second largest cryptocurrency could end up being Classified as a securityand fall under the jurisdiction of the SEC.

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