U.S. IRS Can Issue Summons to Bank Serving Crypto Broker SFOX Customers in Search of Tax Evaders
The Internal Revenue Service (IRS) can issue a "John Doe" summons to a bank that provided services for customers of cryptocurrency prime broker SFOX, a New York judge ordered Thursday. The ruling will allow the tax agency to continue looking for potential tax evaders in an ongoing probe.
The summons requires M.Y. Safra Bank to provide information about the SFOX customers who may not have reported and paid taxes on crypto transactions. In August, the IRS received authorization from a California judge to serve a "John Doe" summons on SFOX itself.
“The government’s ability to obtain third-party information on those failing to report their gains from digital assets remains a critical tool in catching tax cheats," IRS Commissioner Charles P. Rettig said in a U.S. Department of Justice (DOJ) press release. "The court’s granting of the John Doe summons reinforces our ongoing, significant efforts to ensure that everyone pays their fair share."
M.Y. Safra Bank is not alleged to have engaged in wrongdoing, the DOJ release said.
The IRS has previously served such summons's on companies like Kraken and Circle, and typically does so when it wants to confirm whether the recipient's customers are properly reporting their taxes. Cryptocurrency transactions are taxed like property, with the IRS collecting capital gains tax on every transaction.
The California judge's ruling authorized the IRS to serve a summons against SFOX, asking for information about any "U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency between 2016 and 2021 with or through SFOX. SFOX will be required to share any records identifying those users and their transactions through the service.