The US Internal Revenue Service (IRS) has granted authority to issue a “John Doe” subpoena to MY Safra Bank, a New York court ruled Thursday. The subpoena will require the bank to provide information on customers who may have failed to report and pay taxes on crypto transactions through SFOX’s flagship merchant.
In its filing to support the subpoena, the IRS cited “significant tax compliance deficiencies” related to cryptocurrency transactions made through the SFOX platform.
“Taxpayers dealing with cryptocurrency must understand that income and profits from cryptocurrency transactions are taxable,” US Attorney Damien Williams said in a statement, adding that the information requested in the subpoena “will help ensure that crypto owners comply with tax laws.” “
SFOX, which has more than 175,000 registered users who have collectively completed over $12 billion in transactions since 2015, connects crypto exchanges, virtual currency (OTC) brokers and liquidity providers.
MY Safra Bank partnered with SFOX in 2019 to offer its customers cash deposit accounts backed by the Federal Deposit Insurance Corporation, where users can use these accounts to buy and sell digital assets.
“The government’s ability to obtain information from a third party about those who do not report their digital asset gains remains an important tool for catching tax fraud,” said IRS Commissioner Charles Rettig.
According to Rettig, the court’s decision to approve the lawsuit reinforces “our ongoing and significant efforts to ensure that everyone pays their fair share.”
“Taxpayers who earn income from digital asset transactions must abide by their filing and reporting responsibilities,” he added.
The IRS is chasing crypto tax fraud
This is not the first time that a US court has granted the IRS the right to collect data from customers involved in cryptocurrency transactions.
In August of this year, a California court authorized the IRS to file a subpoena against SFOX, requesting information on all “US taxpayers who conducted at least $20,000 in cryptocurrency transactions between 2016 and 2021 with or through SFOX.” .”
Among some of the individuals covered in the petition was an individual “allegedly involved in a Ponzi scheme” who received nearly $1 million in deposits through SFOX, but was not reported to the IRS in 2016, 2017, or 2018. Other individuals allegedly deposited thousands of dollars worth Bitcoin and other cryptocurrencies in SFOX accounts, exchange them for dollars, transfer funds to personal bank accounts, and then fail to report any profit or loss from the transaction.
In 2017, courts authorized the IRS to subpoena crypto exchange John Doe Currency base. This resulted in the company sharing information about about 14,000 of its users.
Last April, courts approved again the subpoenas issued by crypto exchange Kraken and Circle, the issuer of “John Doe.” stablecoin USDC.
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