The Department of Justice (DOJ) is cracking down on unreported crypto transitions.
Key Details
- A recent court order from the DOJ to the IRS has authorized actions against individuals who fail to report and pay taxes on their crypto earnings.
- “The IRS continues to chase U.S. taxpayers who failed to report and pay taxes on cryptocurrency transactions with a new court order allowing a summons for customer records,” says CNBC.
- “Though taxpayers who transact in cryptocurrencies are required to report any associated profits and losses on their tax returns, the IRS’s experience has demonstrated significant tax compliance deficiencies relating to cryptocurrencies and other digital assets,” says the DOJ.
- The DOJ is set to issue a John Doe summons and will force New York City-based M.Y. Safra bank to hand over data from a large digital currency broker that has worked with this bank.
- CNBC reports that this will turn over data on 175,000 users and $12 billion in transactions.
- “There is no allegation in this action that M.Y. Safra engaged in any wrongdoing. Rather, the IRS utilizes John Doe summonses to obtain information about possible violations of the internal revenue laws by individuals whose identities are unknown,” says the DOJ.
Why it’s news
Cracking down on crypto transactions has become a high priority for the federal government. Just last week, the White House encouraged the U.S. Securities and Exchange Commission to tighten regulations on crypto.
“The Internal Revenue Service (IRS) has received authorization from a U.S. district judge to sniff out individuals who attempt to sidestep taxes on their cryptocurrency transactions. The order comes at a time when digital asset adoption is seeing a surge, and the number of crypto tax evaders is subsequently increasing,” says Crypto News.
As we previously reported, President Joe Biden signed the Inflation Reduction Act on August 16. One of the directives was to increase IRS tax enforcement to retrieve $124 billion, in order to pay for additional spending on environmental investments and health care extensions.
“The bulk of new audit activities will be directed at high-net-worth individuals, large corporations, and complex partnerships,” says CNBC.
“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…to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions,” says U.S. Attorney Damien Williams.
