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IRS Ramps Up Efforts on Noncompliant Crypto Taxpayers

The IRS continues its efforts of tracking down taxpayers for their unreported and unpaid taxes.  This comes following a new court order allowing the IRS to summon customer records from M.Y. Safra Bank. This isn’t the first summons from the IRS for crypto records, however, it does seem unusual because the broker they are requesting the records from is smaller than previous targets, signaling the possibility of more to come for the everyday trader.

The John Doe Summon

According to the U.S. Department of Justice, the agency will issue a “John Doe Summons” which will require M.Y. Safra Bank to turn over crypto transaction data for SFOX, which is a full-service crypto prime dealer for institutional investors that used the bank. The dealer has over 175,000 users with over $12 billion in transactions since 2015. “The IRS has indicated this is a very high priority for them,” said Andrew Gordon, tax attorney, CPA.

Since 2019, “virtual currency” or crypto, has been a big question mark when it comes to taxes. In 2021, Congress passed a $1.2 trillion bipartisan infrastructure law, with a provision requiring digital currency brokers to report their taxes annually. This measure may bring in almost $28 billion over the next 10 years.

What To Do If You Haven’t Reported Your Crypto

Experts say crypto investors must be proactive when it comes to reporting their crypto earnings to the IRS. If you haven’t reported your crypto income on past tax returns, it is highly encouraged to speak with a tax professional.  They can provide you with all the necessary information to properly report the income to avoid any potential audits or worse.

Wrap Up

Crypto has been a major headache for investors and the IRS from a tax perspective for several years now. It seems as though the IRS is coming to a boiling point when it comes to unreported and incorrectly filed income from digital assets. If you have any unreported income, or just aren’t sure, contact a trusted financial expert to point you in the correct direction.

 
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