IRS steps up tax collection on cryptocurrency, bitcoin profits

The Internal Revenue Service is going to court to obtain cryptocurrency transaction records as part of its continued effort to collect more taxes from Americans who fail to report profits from digital coin trades.

Federal prosecutors in Manhattan announced that they had obtained a court order allowing the IRS to obtain information from MY Safra Bank about US taxpayers who did not disclose crypto-related income.

A federal judge allowed the IRS to issue a so-called “John Doe subpoena” for data on clients of SFOX, a cryptocurrency prime broker whose clients were offered access to services by MY Safra Bank.

According to the federal government, the IRS has “identified at least ten US taxpayers who used SFOX’s services for cryptocurrency transactions but did not report those transactions to the IRS as required by law.”

However, federal prosecutors added that the court order does not suggest that MIN Safra committed any wrongdoing.

Posten has asked for a comment from MY Safra Bank.

“SFox wants to be helpful and respectful in any investigation, while ensuring we protect our customers’ personal or private information,” a spokeswoman said in a statement. “Since receiving the John Doe subpoena in August, we have been cooperating with the IRS and will continue to review cases internally while speaking with outside legal counsel about next steps.”

Federal prosecutors said SFOX has more than 175,000 registered users who have made $12 billion worth of cryptocurrency transactions over the past seven years.

“Based on its recent experiences with cryptocurrencies, the IRS has strong reason to believe that many virtual currency transactions are not being properly reported on tax returns,” according to a press release from the US Attorney’s Office for the Southern District of New York.

Last year, President Joe Biden signed a $1.2 trillion bipartisan infrastructure measure that included a provision specifying requirements for cryptocurrency brokers to report information to the IRS.

Cryptocurrency enthusiasts rejected the reporting requirement, which the government says will raise about $28 billion over the next ten years.

The new law will apply existing money laundering laws to digital transactions.