IRS hunts crypto tax evaders with M.Y. Safra Bank summons
Quick Take
- IRS to issue a summons on M.Y. Safra Bank, which serves crypto prime broker SFOX.
- The tax agency is seeking information on SFOX users who may have evaded taxes.
The U.S. Internal Revenue Service (IRS) has been granted the power to issue a so-called "John Doe" summons to M.Y. Safra Bank, allowing the tax agency to obtain data on customers of the bank's partner SFOX, a crypto prime broker.
The news is the result of a court ruling on Thursday. The court order, which U.S. district judge Paul G. Gardephe approved, authorizes the IRS to serve the summons against M.Y. Safra Bank, asking for information about SFOX customers that may not have reported their crypto transactions on tax returns.
M.Y. Safra Bank partnered with SFOX in 2019 and offers SFOX users access to cash-deposit bank accounts. The IRS has identified at least ten SFOX users who failed to report their crypto transactions as required by law.
The IRS treats crypto transactions as property, levying capital gains tax on every transaction. In August, the IRS received authorization to serve a John Doe summons on SFOX itself. At the time, the IRS was looking for information about any "U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency between 2016 and 2021 with or through SFOX."
M.Y. Safra Bank and SFOX themselves are not accused of violating any laws. A John Doe summons is one made out to an unidentified defendant, who is referred to as John Doe.
"Taxpayers are required to truthfully report their tax liabilities on their returns, and liabilities that arise from cryptocurrency transactions are not exempt," said Damian Williams, the U.S. attorney for the Southern District of New York, in a statement. "The government is committed to using all of the tools at its disposal, including John Doe summonses, to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share."
The IRS has previously served such summons on crypto companies like Kraken, Circle and Coinbase. Earlier this year, IRS official Carolyn Schenck warned that crypto investors should "expect more" John Doe summonses from the tax agency.
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