For a long, the cryptocurrency space operated anonymously. People were able to send and receive cryptos without revealing their identities. However, the enactment of KYC and AML regulations on crypto platforms meant that the exchanges now have customer information. Tax agencies are now using that and seeking customer data from the cryptocurrency exchanges.
IRS demands customer data from Circle
The United States Internal Revenue Service (IRS) has been granted a “John Doe” summons to obtain information and identify Circle customers who might have failed to report their crypto transactions.
The official notice by the Department of Justice was issued two days ago, allowing the IRS to get the identities of the Circle customers who failed to report their crypto transactions and include them in their tax reports.
The notice revealed that the IRS is seeking information about .S taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency during the years 2016 to 2020. Acting Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division pointed out that cryptocurrency traders and investors must fulfill their tax obligations.
IRS Commissioner Chuck Rettig added that the John Doe order shows that the IRS is working to ensure that US taxpayers are fully compliant in their use of virtual currency. “The John Doe summons is a step to enable the IRS to uncover those who are failing to properly report their virtual currency transactions. We will enforce the law where we find systemic non-compliance or fraud,” he added.
Judge asks IRS to narrow request for Kraken customer data
The IRS is also seeking customer data of cryptocurrency traders and investors on Kraken. Following the John Doe notice on Kraken, the Department of Justice filed for the IRS to issue the same request to Kraken.
The court responded to the request, stating that the government’s request is “overbroad.” Hence, the Department of Justice needs to refile the request with a narrowed scope. The Judge’s order reads, “Any such response must specifically address why each category of information sought is narrowly tailored to the IRS’s investigative needs, including whether requests for more invasive and all-encompassing categories of information could be deferred until after the IRS has reviewed basic account registration information and transaction histories.”
The IRS is going after numerous cryptocurrency exchanges to obtain customer data. This is part of the tax regulator’s move to track and identify traders and investors who failed to report their cryptocurrency earnings over the past few years.