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The United States Internal Revenue Service is going after crypto holders who might have used digital currencies to hide taxable income. This time, the IRS is going after the records of the Circle and Poloniex platforms to look at customer data for the past five years.
A Massachusetts federal court has recently authorized the IRS to serve a “John Doe summons” on Circle Internet Financials Inc., according to Cointelegraph. The summons also includes Circle’s subsidiaries and predecessors, affiliates, and divisions, including Poloniex LLC, which was acquired by Circle in 2018.
“There is a reasonable basis for believing that cryptocurrency users may have failed to comply with federal tax laws,” U.S. District Court Judge Richard Stearns said. The court order also mentioned that the summons seeks information related to IRS’s “investigation of an ascertainable group or class of persons” who “may have failed to comply with any provision of any internal revenue laws.”
IRS’s goal in serving the summons is to identify crypto users who made $20,000 or more in crypto transactions, according to Bitcoin.com. The tax agency has also narrowed its search and only seeks to investigate transactions during the four-year period from 2016 until 2020.
“The John Doe summons is a step to enable the IRS to uncover those who are failing to properly report their virtual currency transactions,” IRS Commissioner Chuck Rettig said:
This isn’t the first time that the IRS has served a crypto-related John Doe Summons. On November 30, 2016, a federal court in the Northern District of California authorized the IRS to serve a John Doe summons on Coinbase Inc. In Coinbase’s case, the tax agency sought to obtain information about U.S. taxpayers who made crypto transactions from 2013 and 2015.
With the John Doe summons, the IRS is sending a strong signal when it comes to enforcing tax laws on crypto transactions. “The Service has made clear for the past several years that it is looking at tax compliance and tax evasion in the cryptocurrency field,” Betty Williams, the Managing Shareholder of the Law Office of Williams & Associates, P.C., said, according to Forbes. “Cryptocurrency users should make sure they are in compliance with their reporting requirements because the Service is sure to keep its word regarding this area as a top priority for enforcement.”
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