The IRS has been granted a court order to collect records from a bank that the agency says will help identify U.S. taxpayers who failed to report taxable income from crypto transactions.
Uncle Sam said yesterday it was specifically looking at records of New York-based bank MY Safra, which has partnered with SFOX – a cryptocurrency prime broker – to offer its clients access to bank accounts with cash deposits. SFOX users could thus use funds at MY Safra to buy and sell digital coins.
The IRS was granted a similar filing against SFOX in August. Both organizations were served with a “John Doe” subpoena, a tactic used by the IRS when investigating wrongdoing without knowing the names of accused taxpayers.
Basically, the IRS assumes that people have profited from trading cryptocurrencies through SFOX and MY Safra and have not declared that income nor paid the required tax on it, and therefore the agency wants to hunt down these people and strap them in the wallet ass-kicking machine.
“John Doe’s subpoena directs MY Safra to create records that will enable the IRS to identify US taxpayers who were customers of SFOX and engaged in cryptocurrency transactions that may not have been properly reported on tax returns,” the said Authority.
According to the IRS, its investigation of the cryptocurrency world has uncovered “significant tax compliance deficiencies” across the industry and that it has “strong reason to believe that many virtual currency transactions are not properly reported on tax returns.” However, there are many people who use cryptocoins for legitimate purposes and pay income taxes due on them.
According to the IRS, SFOX has more than 175,000 registered users who have conducted transactions worth more than $12 billion since 2015. The agency said it has identified “at least ten” — count them, ten — US taxpayers who have used SFOX but failed to report transactions.
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With the data collected by MY Safra, the IRS expects to be able to match the identities of SFOX users to Safra services, “which the IRS can then use in conjunction with other information to verify that those users have complied with domestic requirements.” tax laws.”
Damian Williams, US Attorney for the Southern District of New York, where the subpoena was granted, said cryptocurrency transactions are not tax exempt. “The government is committed to using every tool at its disposal … to identify taxpayers who have understated their tax liabilities by underreporting cryptocurrency transactions and to ensure everyone pays their fair share,” Williams said.
Meanwhile, the US Commodity Futures Trading Commission has filed and settled charges against blockchain company Ooki (formerly known as bZeroX) and its founders.
The company and its two operators were jointly accused of illegal over-the-counter trading in assets because they operated as unregistered futures commission dealers and failed to implement a customer identification program as required by the Bank Secrecy Act.
The CFTC announced its settlement in the case along with the filing, stating that the defendants (the company and its two founders) would have to pay a $250,000 penalty and pledging not to violate the Commodity Exchange Act and the CFTC to violate regulations. ®