IRS Launches Lawsuit in Crackdown on Crypto Tax Evaders

The US taxman is cracking down on potential tax evaders by going to court to demand information from a cryptocurrency trader.

The Internal Revenue Service (IRS) has asked federal judges to give it the authority to serve subpoenas on SFOX. The request also includes MY Safra Bank, a financial institution headquartered in New York.

The reason for the increased scrutiny of both entities stems from their partnership back in 2019 that gave customers access to cash deposit accounts that were backed by the Federal Deposit Insurance Corporation (FDIC).

The main focus of the IRS is accounts with cryptocurrency transactions of over $20,000 between 2016 and 2021.

Both SFOX and MY Safra Bank have not yet responded to the agency, according to Bloomberg. One report claims that SFOX’s 175,000 users have made $12 billion worth of transactions.

The IRS claims that crypto users do not pay taxes in full

The tax authorities have always suspected that investors in digital assets and currencies do not declare their taxes in full.

Tracking the financial activity of traders in the circle is made difficult by the private nature of digital assets, which obscures the identity of users.

“Cryptocurrency transactions have grown significantly in recent years, and the IRS is concerned that taxpayers are not properly reporting these transactions on their tax returns,” said a US attorney general.

The cases are in the nature of “The Matter of the Tax Liabilities of John Does”, and over the past few years, similar filings have been made against other digital asset companies such as Kraken, Circle and Coinbase.

Renewed regulatory push

Across the board, regulators are working around the clock to crack down on questionable cryptocurrency activity. The Securities and Exchange Commission (SEC) has revealed that it had opened investigations into leading firms in the ecosystem while they were still embroiled in long-running lawsuits over the issuance of unregistered securities.

The Commodity Futures Trading Commission (CFTC) is also stepping up efforts to regulate the industry as the Legislature mulls new bills.

According to IRS rules, buying digital assets with US dollars and keeping them in your wallet is not taxable. However, selling the asset or placing trades makes it taxable and traders are expected to file the tax correctly.

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