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IRS Targets Crypto Tax Evaders With M.Y. Safra Bank Summons – crypto.news

IRS Targets Crypto Tax Evaders With M.Y. Safra Bank Summons – crypto.news

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The United States Internal Revenue Service (IRS) has issued a “John Doe” subpoena to MY Safra Bank, which allows the IRS to seek information on customers of the bank’s partner SFOX, a primary crypto broker.

The authority of the tax administration to investigate

A court order issued by US District Judge Paul G. Gardephe allows the IRS to issue a subpoena to MY Safra Bank demanding information about SFOX customers who may not have disclosed their cryptocurrency transactions on tax forms.

In 2019, MY Safra Bank and SFOX partnered to offer SFOX users access to cash deposit bank accounts. The IRS has found at least ten SFOX users who broke the law by not reporting their cryptocurrency transactions.

Every cryptocurrency transaction is subject to capital gains tax because the IRS considers them property. The IRS was given permission to deliver the John Doe subpoena directly to SFOX in August. The IRS requested additional information on “US taxpayers who conducted at least $20,000 in bitcoin transactions between 2016 and 2021 with or through SFOX.” at the moment.

Both MY Safra Bank and SFOX are not accused of breaking any laws. US Attorney for the Southern District of New York Damian Williams said in a statement that tax liabilities arising from cryptocurrency transactions are not exempt and taxpayers must accurately report them on their forms. The government is dedicated to finding taxpayers who have misrepresented their tax obligations by failing to report cryptocurrency transactions and making sure everyone pays their fair share using every tool at their disposal, including John Doe subpoenas.

What are the penalties?

Under the Federal Tax Avoidance Act, tax evasion fees resulting from failure to pay taxes on bitcoin profits are collected. An income earner commits an offense when he knowingly tries to avoid paying taxes.

Anyone who fails to report taxable income is subject to a fine of up to $100,000 and up to three years in prison under IRC 7206. Tax evasion is punishable by up to five years in prison and a $250,000 fine.

How does the IRS find crypto tax evaders?

The IRS uses subpoenas/subpoenas to track crypto transactions, among other things. In recent years, challenges have been sent to several exchanges demanding the disclosure of certain user accounts. For example, the IRS requested information from Coinbase on more than 13,000 accounts, including name, taxpayer identification number, address, date of birth, transaction logs, account transaction records, and any bank statements or invoices. Similarly, the IRS has authorized the disclosure of US taxpayer information used by other exchanges, including Circle, Kraken and Bitstamp.

The prosecutors’ challenge is to prove that the evader’s actions were intentional or premeditated. Cryptocurrency users can avoid punishment entirely by claiming that they did not know that the debt obligations arose from their coins. However, when deciding whether the defendant was aware of his tax obligations, the courts consider all relevant material.

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