beincrypto.com
A United States federal court in the Northern District of California yesterday authorized the Internal Revenue Service (IRS) to serve a John Doe summons on Payward Ventures Inc., the parent company of Kraken.
John Doe summons rose to notoriety in 2008 when they were used to combat Swiss banking secrecy laws. In 2008, UBS turned over the names of almost 4,500 holders of Swiss bank accounts to the IRS. This summons, unlike others, does not need to list the name of the taxpayer under investigation, as they are unknown to the IRS.
The court approved summons will demand that personal information on any U.S. taxpayer that traded at least $20,000 in cryptocurrency transactions between 2016 and 2020 is released. These records focus primarily on the San Francisco-based digital currency exchange, Kraken.
Crypto faces increased scrutiny
This latest development comes as cryptocurrencies are facing increased scrutiny across the U.S., with a swath of cases being taken by the SEC and the IRS. The SEC is currently engaged in a legal battle with Ripple, with the latter arguing the charge is null and void as their token, XRP, is a currency and not an investment contract.
Meanwhile, the IRS released statements recently to clarify taxation around cryptocurrency, in particular bitcoin (BTC) 2017 hard fork. Commissioner of the IRS Chuck Rettig had the following to say on the matter, and cryptocurrencies in general:
“There is no excuse for taxpayers continuing to fail to report the income earned and taxes due from virtual currency transactions.”
IRS guidance
This John Doe summons has serious ramifications for any U.S. taxpayers trading at or above the quantities mentioned. If the IRS is successful to the same effect as the 2008 John Doe summons served to UBS, then the ramifications for delinquent U.S. taxpayers could be huge.
The IRS guidance provides that cryptocurrencies that can be converted in fiat currencies are to be considered property for tax purposes, therefore they can be taxed accordingly on the gain or loss on the sale or exchange of them.