IRS Can Now Hunt US Crypto Tax Evaders After Landmark Ruling

The Internal Revenue Service (IRS) has received authorization from a US district judge to sniff out individuals attempting to evade taxes on cryptocurrency transactions. The order comes at a time when adoption of digital assets is seeing an increase, and the number of crypto tax evaders is increasing accordingly.

A press release from the US Department of Justice revealed the development on Thursday. Per the release, US District Judge Paul Gardephe authorized the IRS to issue John Doe subpoenas demanding information related to crypto tax evaders from the full-service banking institution MY Safra Bank.

The move was announced by IRS Commissioner Charles Rettig, United States Attorney Damian Williams and Deputy Assistant Attorney General for the Tax Division of the Department of Justice, David Hubbert.

The call will specifically take sFOX – a crypto-focused prime brokerage platform – into consideration. This is due to sFOX’s collaboration with MY Safra Bank, which enables the broker’s customers to take advantage of MY Safra Bank’s crypto offers. The IRS will be looking for customers who have not reported to the IRS to pay the required taxes on their crypto transactions.

The increased efforts to hunt down tax evaders in the crypto scene is due to the worrying number of crypto tax defaults. According to the press release, the tax authorities have noticed “significant deficiencies in tax compliance related to cryptocurrencies and other digital assets” in his experience.

Speaking on the matter, US Attorney Damian Williams noted that cryptocurrency traders are not exempt from paying taxes in the US, as is correct.

“The government is committed to using all tools at its disposal, including John Doe subpoenas, to identify taxpayers who have understated their tax obligations by not reporting cryptocurrency transactions, and to ensure that everyone pays their fair share.” Williams added.

Furthermore, IRS Commissioner Charles Rettig emphasized the importance of the court’s authorization to the agency. According to him, the order will help support their already established efforts to ensure that all individuals pay their fair share of taxes.

The US taxes crypto as investments rather than currency

In addition, Deputy Assistant Attorney General David Hubbert sought to remind cryptocurrency traders in the United States that their winnings are taxable. Accordingly, it is important for US crypto investors to understand the manner in which their transactions are taxed. The US IRS taxes cryptocurrencies as investments, and not necessarily as currency.

Because of this view, long-term holders of cryptocurrency enjoy lower taxes when they have held their assets for up to a year. These rates are usually between 0% and 20%. Despite this, short-term owners who hold their assets for less than a year will pay anywhere between 10% and 37%.

Despite the apparently high crypto tax rate, the US still does not occupy the position of the country with the worst crypto tax rate. That crown goes to Belgium which taxes crypto transactions at up to 33% or 50% depending on whether the transactions are speculative or considered professional income.