What the latest IRS crypto tax filings subpoenas mean for investors

The IRS continues to chase US taxpayers who fail to report and pay taxes on crypto transactions with new court order Allows a customer record summons.

The agency will issue a so-called “John Doe summons” ordering MY Safra Bank to turn over crypto transaction data to SFOX, a digital currency broker that already uses the bank, with more than 175,000 users and more than $12 billion in transactions since 2015, according to the US Department of Justice.

Andrew Gordon, tax attorney, CPA and president of Gordon Law Group in Skokie, Illinois, said this is not the first summons by the IRS for crypto filings, but it is unusual because the broker seems to like “quite small”. .

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“The IRS has indicated that this is a very high priority for them.” Gordon added.

While the first summons for crypto tax filings is activated IRS letter for unreported income and unpaid taxesMatt Metaras, a registered agent and crypto tax specialist at MDM Financial Services in Rochester, New York, said the response took several years.

“I’m curious to see what happens with all this data they’re collecting, noting that the IRS may try to match it with investors’ tax returns,” said Metaras.

The IRS could crack down on high earners with more checks

Crypto tax reporting confusion persists

Since 2019, there has been a question about “virtual currency” on the front page of a tax return, requiring tax preparers to disclose their taxable crypto activity.

However, there is still uncertainty about how to answer the question, explains Yu-Ting Wang, vice president of the virtual currency task force of the International Association of Certified Professional Accountants.

Organization submitted comments to the IRS on the question in late August, asking for a revised query and clearer guidance with examples before the agency completes its 2022 tax return, she said.

The IRS has indicated that this is a very high priority for them.

Andrew Gordon

Chairman of Gordon Law Group

In 2021, Congress passed a $1.2 trillion bipartisan infrastructure law, with a provision annual tax reporting requirements from crypto brokers starting in 2023.

This measure could bring in nearly $28 billion in a decade, according to one Estimated 2021 from the Joint Commission on Taxation of the National Assembly.

But tax experts are still looking for guidance on the definition of “broker” to know which companies must comply, Wang said.

What to do if you do not comply

No matter which company reports activity to the IRS, experts say Cryptocurrency investors must be proactive.

If you haven’t reported crypto income on tax returns before, you should talk to a tax professional with digital currency expertise, Wang suggested.

“You’re better off going ahead and filing an amendment than having the IRS check you out — or maybe even worse, for not reporting crypto,” says Gordon.

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