On Thursday, a court ruling in New York granted the US Internal Revenue Service (IRS) the authority of issuing a ‘John Doe’ summons to the bank named M.Y. Safra.
Thanks to the summons, the bank will now be obligated to provide information about customers who may not have reported as well as not paid taxes on crypto transactions conducted via prime dealer SFOX.
The IRS had submitted a petition to the court, asking for it to grant the authority for the summons because of major tax compliance deficiencies.
The tax authority outlined that these deficiencies were associated with crypto transactions that were conducted through the SFOX platform.
Damian Williams, the US Attorney, stated that all taxpayers who use crypto for conducting transactions should be aware that the gains and income they generate via the digital currencies are all taxable.
He further added that the information they demand via the summons would be used for ensuring that all crypto owner are compliant with the tax laws.
The SFOX platform connects liquidity providers, crypto exchanges and over-the-counter (OTC) virtual currency brokerages.
It has more than 175,000 registered users and since 2015, the total value of transactions that have been conducted through the platform are around $12 billion.
In 2019, M.Y. Safra Bank had entered into a partnership with SFOX for offering its clients cash deposit accounts that were backed by the Federal Deposit Insurance Corporation.
These accounts could be used by their customers for purchasing and selling digital assets. Charles Rettig, the Commissioner for the IRS, said that their priority is to catch tax cheats.
He said that a critical tool for accomplishing this goal was to get access to third-party information on people who are not reporting the gains they generate from digital assets.
Rettig said that the decision of the court to grant the summons allows them to continue with their efforts for ensuring everyone is paying their taxes.
He added that taxpayers who use digital asset transactions for earning income should be in compliance with their reporting and filing responsibilities.
Crypto tax evasion
This is certainly not the first time that the IRS has been granted authority by a US court for collecting the data of people engaged in crypto transactions.
This year in August, a ruling in a California court had given the US tax agency the authority to serve SFOX a summons.
This was to demand information about any taxpayer in the US who had executed transactions worth $20,000 in crypto with or without SFOX during 2016 and 2021.
Some of the people who had been part of the petition included an individual who was believed to have been involved in a Ponzi scheme and had gotten deposits of $1 million via SFOX.
However, this had not been reported to the IRS in 2016 to 2018. Likewise, there were also people who had deposited Bitcoin worth thousands of dollars in their SFOX accounts but did not report the gains they made by converting them into dollars.