IRS Receives Authorization to Pursue America’s Crypto Tax Evaders

Following a court ruling in the United States for the Southern District of New York, America’s tax regulator Internal Revenue Service (IRS) has received permission to issue a ‘John Doe’ summon to some banks.

The banks in this category are those that have customers who have failed to fulfill their crypto tax obligations. Autonomously, the IRS now has the authority to request information about these defaulting bank customers. This authorization was granted by U.S District Judge Paul G. Gardephe.

The announcement was jointly made by Damian Williams, the U.S Attorney for the Southern District of New York, David A. Hubbert, Deputy Assistant Attorney General for the Justice Department’s Tax Division, and Charles P. Rettig, Commissioner of the IRS.

Currently, New York M.Y Safra Bank is faced with this summons in connection to customers of cryptocurrency prime broker SFOX. Therefore, the IRS is seeking information from M.Y Safra Bank which was used by SFOX to offer crypto services to its customers.

Specifically stated in the ruling, M.Y Safra Bank provided cash-deposit accounts to SFOX customers. Then, these customers used funds in this account to buy and sell positions with digital assets from the SFOX trading platform. 

Crypto Investors Expected to Pay Tax

Even with the laid down framework for crypto tax payment, the tax regulator has experienced a lot of defiances and non-compliance from users of cryptocurrencies and other digital assets. Speaking of this, Damian Williams said, 

“Taxpayers are required to truthfully report their tax liabilities on their returns, and liabilities that arise from cryptocurrency transactions are not exempt.  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.”

Meanwhile, no part of the John Doe summons indicts the bank like in the case of M.Y Safra Bank. The tax regulator is only seeking information to ascertain that there has been no violation of internal revenue tax law from persons whose identities are not known. For now, it is still not certain if the IRS will impose a tax on staking rewards until they are sold.