The Internal Revenue Service is going after unpaid taxes on cryptocurrency. The agency obtained a court order to go after taxpayer records related to unreported cryptocurrency earnings and unpaid crypto taxes. The increased pressure on crypto taxes comes after the IRS received a ten-year, $80 billion budget.
Is this an example of the IRS harassing middle-class taxpayers as some claim they would? Or is this a long-time coming since crypto boomed in popularity? Here’s everything you need to know about the IRS cracking down on crypto taxes.
It’s not the first time the IRS cracked down on crypto taxes.
In 2019, the IRS issued a warning to thousands of cryptocurrency holders to report their earnings and pay their taxes. And in 2018, Coinbase received a court order demanding they hand over information on accounts worth $20,000 to the IRS. And again, in 2019, the IRS included a new question on tax forms related to cryptocurrency. However, the question’s wording resulted in many confused taxpayers “playing with fire,” according to a tax specialist.
A 2021 law already expanded crypto tax reporting.
A $1.2 trillion bipartisan infrastructure deal from 2021 expanded crypto tax laws and made annual crypto earnings reports mandatory. In addition, the bill marked the first significant expansion by the IRS to go after unpaid taxes on crypto earnings. According to the Joint Committee on Taxation, the 2021 bill could generate over $28 billion in a decade.
What does the court order actually mean?
The court order by the DOJ allows the IRS to issue a “John Doe summons” to M.Y Safra bank. The summons forces the bank to turn over transaction data related to SFOX, a crypto broker with over 175,000 users. Additionally, according to the DOJ, SFOX facilitated over $12 billion in cryptocurrency transactions in 2015. Which, in the grand scheme of cryptocurrency exchanges, is a relatively small amount. For context, the DeFi exchange Uniswap has a daily trade volume of about $961 million.