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IRS and New York officials work together to ramp up crypto tax collection efforts

On Behalf of | Jan 13, 2023 | Criminal Tax Issues

The Internal Revenue Service (IRS) recently announced that it received court approval to gather US taxpayer records from M.Y. Safra Bank. M.Y. Safra is headquartered in New York and focuses on provision of private banking services. The court order focuses on gathering information about US taxpayers who use the institution’s banking services and failed to report cryptocurrency transactions.

This is the IRS’s latest move in its move to increase collection efforts for crypto transactions.

What will the IRS learn from this court order?

The court order, known as a John Doe summons, allows the IRS to demand M.Y. Safra produce records that identify US taxpayers that engaged in cryptocurrency transactions. The IRS will then investigate these individuals to see if they reported these transactions in compliance with applicable tax law.

What does this mean for other taxpayers with crypto?

Although this summons focuses on a specific cryptocurrency prime broker, it is a move that is part of a broader attempt to come after those who fail to report crypto transactions. The feds can and will use information obtained from third parties, like crypto companies, through the use of John Doe summons to find those who fail to properly report their taxable income.

When am I supposed to report crypto transactions?

The IRS expects those who make a profit or loss with crypto transactions to report these actions on their tax returns. The IRS reminds taxpayers that income and gains from cryptocurrency are not exempt — these funds are subject to tax rules.

What should I do if I have unreported crypto assets?

It is important to review and carefully consider options for compliance. This can reduce the risk of allegations of criminal wrongdoing. The attorneys at Goldburd McCone have experience helping US taxpayers declare their cryptocurrency gains and mitigate the risk of allegations of tax fraud.