IRS’ latest crypto efforts focus on $20,000 or more in transactions

On Behalf of | Apr 15, 2021 | Tax Collection

The Internal Revenue Service (IRS) has made its focus on cryptocurrency clear in recent years. The feds expect taxpayers to report and, when applicable, pay taxes on these transactions — and they are not afraid to get aggressive to gather information on who is trying to avoid their obligations. Just a few years ago it issued a summons that required Coinbase to provide client information; and another similar effort is currently underway.

The feds have gotten approval from a court in Massachusetts to move forward with a John Doe summons on Circle Internet Financial Inc. Officials structured the summons to gather information on taxpayers who conducted $20,000 or more in cryptocurrency transactions from 2016 through 2020.

What is a John Doe summons?

Generally, when the government puts together a summons to gather information about a taxpayer the summons is for a specific individual or business. A John Doe summons allows the IRS to gather information about a group of taxpayers. In this case, that group of taxpayers are those who used Circle Internet Financial Inc or its subsidiaries to conduct $20,000 or more in cryptocurrency transactions.

What happened when the government went after Coinbase?

Business leaders with Coinbase chose to push back for a while, but eventually decided a settlement with the government was in their best interest. As part of the settlement, they increased the restrictions for the type of clients the government could gather information about their users.

What will happen in this case?

It is possible Circle will follow the same path set out by Coinbase. They may push back and agree to a more restricted set of information, meet the government’s demands as is or fight the summons all the way to court.

What should taxpayers take away from this case?

Those who use cryptocurrency need to know that these transactions are not anonymous. The IRS is watching and, if you are not meeting your tax obligations, you can face serious allegations of wrongdoing. Tax evasion is no joke. It can come with steep financial penalties and potential imprisonment.

Taxpayers can take steps to come into compliance, the attorneys at Goldburd McCone can help.