IRS Is Out to Clean up the Crypto Streets

• The IRS continues to chase unpaid cryptocurrency taxes with a new court order allowing a summons for customer records.
• The IRS is yet to receive 80 Billion in funding from the federal government.

Just weeks after SEC under the leadership of prominent chairman Gary Gensler made a major crackdown on Tornado cash mixers, another batch in the US federal government has decided to set its eyes on unpaid cryptocurrency taxes.

US residents who sidestepped on their digital assets woke up to flabbergasting news last week. Joe Biden’s gesture of hiring 87,000 new IRS agents will now be put to use as the federal tax agency received approval to issue a summons to M.Y. Safra Bank, the banking partner of digital currency prime broker SFOX.

A court order issued last week, allowed the IRS to issue so-called “John Doe” summons to New York-based M.Y. Safra Bank, a digital currency prime broker that used the bank, with more than 175,000 users and over $12 billion in transactions since 2015.

According to the IRS, the authorization offered targeted U.S. users who conducted $20,000 or more transactions between 2016 and 2021. This means that small users were off the IRS radar.

In accordance with  a U.S. attorney for the Southern District of New York, Damian Williams;

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

This could just be the beginning according to Andrew Gordon, tax attorney, CPA, and president of Gordon Law Group in Skokie, Illinois. Andrew states that” It’s not the first IRS summons for crypto records, but it’s unusual because the broker seems to be “quite small,” signaling the possibility of more to come” He later adds “The IRS has indicated this is a very high priority for them,”

IRS Set for 80B in Funding

Under the new Inflation reduction Act, The IRS is yet to receive 80 Billion in funding from the federal government. Almost 58% of the funding will be used for enforcement, which includes tracking down cryptocurrency tax evasion. Under federal law, cryptocurrencies fall under the jurisdiction of tax purposes.

With a law set to be enacted in 2023, the IRS could also beef up its crypto crackdown through the Infrastructure bill. This law will require crypto brokers to report the identity of clients and their transaction activity. This latest summons is being handled by the IRS S’s Tax and Bankruptcy Unit, with Assistant U.S. Attorney Jean-David Barnea handling the case.