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IRS secures court approval to probe records of M.Y. Safra Bank, SFOX users over failure to report taxes

IRS secures court approval to probe records of M.Y. Safra Bank, SFOX users over failure to report taxes

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On September 22, a US judge approved a petition by the Internal Revenue Service (IRS) requiring MY Safra Bank to provide information on taxpayers who may not have reported or paid taxes on crypto transactions.

In particular, the IRS is interested in the data of users of SFOX, a major cryptocurrency broker, according to a press release. New York-based bank MY Safra provided banking services to SFOX customers for crypto transactions, the US Attorney’s Office said in a press release.

Taxpayers must report all cryptocurrency-related gains or losses on their tax returns. However, the law firm said the IRS had identified a significant gap in digital asset tax compliance.

IRS Commissioner Charles P. Rettig said:

“The government’s ability to obtain third-party information about individuals who fail to report their digital asset income remains a critical tool in targeting tax evaders… Taxpayers who receive income from digital asset transactions must meet their filing and reporting obligations.”

According to a press release, the IRS has found “significant underreporting” of crypto transactions through subpoenas sent to other cryptocurrency traders. In addition, the IRS has identified at least ten taxpayers who used SFOX for crypto transactions but failed to report them as required by law.

SFOX connects crypto exchanges, digital asset brokers and liquidity providers. According to a press release, it serves more than 175,000 registered users who have collectively transacted more than $12 billion since 2015.

SFOX partnered with MY Safra bank to enable its users to access cash deposit accounts. Users can use their cash to trade cryptocurrencies through these accounts.

According to the press release, the IRS expects that MY Safra will be able to provide information about the identity and crypto transactions of SFOX users who used the bank’s services. The Tax Administration uses information from MY Safra bank and other sources to assess possible deficiencies in compliance with tax regulations.

The U.S. Attorney’s Office for the Southern District of New York said the subpoena does not address allegations of wrongdoing. Instead, the subpoena is a way to reveal information about unknown taxpayers who have not been allowed to comply with internal revenue laws.

The IRS also got the green light to serve a subpoena demanding customer transaction data from SFOX itself on August 15.

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