Cryptocurrency has become much more popular among Americans, but the IRS is catching up to those who failed to report transactions and pay taxes on them.
A new court order is allowing the IRS to target those failing to pay taxes by issuing a summons for customer records, according to CNBC.
Cryptocurrency transaction data for SFOX will be handed over to the IRS. This digital currency broker has over 175,000 users and has totaled over $12 billion dollars in transactions since the year 2015.
What is happening with the IRS chasing Americans who did not claim or pay taxes on cryptocurrency transactions?
The new court order being issued is called a “John Doe summons.” The order will force M.Y. Safra Bank to hand over all transaction data for cryptocurrency with the broker SFOX.
Andrew Gordon, tax attorney, CPA and president of Gordon Law Group in Skokie, Illinois, shared his expert opinion with CNBC. The IRS has gone after these types of transactions before, but there is a difference this time. SFOX is a much smaller broker, which makes it appear like the IRS will continue to go after smaller ones.
The IRS has made it clear they’re prioritizing getting these records and finding the people responsible for not paying their taxes. What the IRS will do with these records hasn’t been shared. It could be a case of the IRS trying to match these transactions with tax returns submitted by investors.
People are confused about the IRS rules and laws surrounding digital currency
Starting in 2019 the IRS has asked filers to report their taxable crypto transactions. They did this by adding a question about virtual currency to the front page of a tax return.
In 2021, through a $1.2 trillion dollar infrastructure law, Congress made it so digital currency brokers would need to submit annual tax reports starting in the year 2023.
Now tax professionals are trying to gain clarity on what exactly a broker is so they know who needs to comply with the tax laws.
If you have any cryptocurrency transactions you know you should have claimed, it’s better to get ahead. Speak with a tax expert immediately to obtain guidance. From there, it’s best to file an amendment to your taxes than being audited by the IRS. During an audit, you could be found guilty for not reporting the virtual currency transactions.
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Samantha edits our personal finance and consumer news section. Have a question or lead? Send it to [email protected].