IRS to summon users who don’t report and pay tax on crypto transactions

The summons requires M.Y. Safra Bank to submit information about taxpayers who failed to report and pay their taxes on crypto.

With the crypto community growing bigger and as trading volumes reach new highs, the United States is also making more effort to ensure that its Internal Revenue Service (IRS) could properly collect cryptocurrency tax. 

U.S. Attorney Damian Williams, Deputy Assistant Attorney General David Hubbert and IRS Commissioner Charles Rettig announced that US judge Paul Gardephe authorized the IRS to issue a “John Doe summons,” a term used when the IRS investigates unknown taxpayers.

The summons compels the New York-based M.Y. Safra Bank to submit information about taxpayers that might have failed to report and pay taxes on their crypto transactions. According to the announcement, the IRS is specifically looking at users of the crypto exchange SFOX.

The IRS believes that even though crypto users are required to report profits and losses, there’s a significant lack of compliance from taxpayers when it comes to digital assets. According to Williams, the government will use all of its tools to identify taxpayers and make sure that everyone pays their taxes. He explained that:

“Taxpayers are required to truthfully report their tax liabilities on their returns, and liabilities that arise from cryptocurrency transactions are not exempt.”

On the other hand, Rettig said that the authorization of the John Doe summons supports their efforts to ensure that taxpayers dabbling in crypto “pays their fair share.”

Related: Tax expert says buying crypto is not a taxable event

Meanwhile, crypto analytics firm Coincub recently released a study that shows which countries are the worst in terms of crypto taxation. Belgium ranked on top for its 33% tax on capital gains and withholding 50% from income on trades. Runner-ups include Iceland, Israel, the Philippines and Japan. 

On Sept. 6, the Australian government consulted the public in terms of a new law that excludes crypto from being regarded as foreign currency when it comes to taxation. The government gave the public 25 days to share their opinion on the proposal. If signed into law, the definition of digital currency in the countries’ Goods and Services Tax Act will be revised.