The US Internal Revenue Service is stepping up its efforts to collect taxes from cryptocurrency traders, regardless of a 70% market drop.
The IRS has obtained a court order authorizing the subpoena for the records of US taxpayers who have failed to report transactions or pay taxes on crypto profits.
Specifically, the IRS will issue what is known as a “John Doe subpoena” that will require MY Safra Bank to provide crypto transaction data to clients of the SFOX cryptocurrency broker that the bank used. According to the Department of Justice, SFOX has more than 175,000 users and more than $12 billion in transactions since 2015.
Small fried first
The revenue department has identified at least ten crypto traders and investors who used the broker and failed to report their transactions. What stands out, in this case, is that the brokerage is relatively small, suggesting that there could be more court orders for crypto transaction data.
IRS Commissioner Charles Rettig commented, “The government’s ability to obtain third-party information about those who fail to report their digital asset earnings remains a critical tool for catching tax cheats.”
Assistant Deputy Attorney General David A. Hubbert confirmed that income and gains from cryptocurrency transactions were subject to taxation and will be pursued. The IRS strongly believes that there are many unreported transactions and will increase its efforts to track them down, with court orders as its primary weapon.
According to CPA and president of Gordon Law Group, Andrew Gordon, this has become a very high priority for the IRS. The department may also try to match the growing pile of collected data with people’s tax returns to see if they owe anything.
More clarity is required
There is a question on the front of the virtual currency tax return form since 2019. However, there is still a lot of uncertainty about the transactions and the taxes to be paid. The Virtual Currency Task Force of the Association of Certified Professional Accountants International asked the IRS for more clarity in August.
Last year, the Biden Administration passed a $1.2 trillion bipartisan infrastructure bill that included a provision requiring annual tax reporting from crypto asset brokers starting in 2023.
Since the start of the 2022/23 financial year in April, crypto markets have retreated by more than 50%, and many trades since then would have been at a loss.
Featured image courtesy of Apnews
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