Golden Outpost | Taxed? The IRS is authorized to request Kraken to provide user transaction records

Because cryptocurrency transactions are notoriously difficult to trace and anonymous, taxpayers may use them to hide taxable income.

Now the U.S. Internal Revenue Service (IRS) may be preparing to tax cryptocurrency transactions. The Internal Revenue Service (IRS) is seeking to obtain transaction records of U.S. taxpayers on digital currency exchanges.

A federal court in the Northern District of California issued an order on May 5 authorizing the Internal Revenue Service (IRS) to issue a John Doe subpoena to Payward Ventures and its cryptocurrency exchange, Kraken, for production of transactions between 2016 and 2020. Kraken traded more than $20,000 in cryptocurrency user records to identify U.S. taxpayers who "may not be in compliance with internal tax laws."

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The so-called "John Doe summons" is also an alias summons. The real name of the defendant is not known at the time of delivery, but the summons issued under the name of John Doe can be supplemented and corrected if the real name of the defendant is clarified after delivery. .

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The John Doe subpoena issued by the IRS seeks information about unknown taxpayers with potential tax liabilities.

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"The collection of information in the subpoena approved today is an important step in ensuring that cryptocurrency owners comply with tax laws," said General David A. Hubbert, acting Assistant Attorney General of the U.S. Department of Justice's Tax Division. People who trade in currency must meet their tax obligations like other taxpayers."

"There is no excuse for taxpayers to continue not reporting income and tax due from virtual currency transactions," said IRS Commissioner Chuck Rettig.   "This John Doe subpoena is part of our effort to uncover Part of those trying to avoid reporting and avoid paying reasonable taxes."

Prior to this, on April 1, 2021, a Massachusetts federal court issued an order authorizing the IRS to require Boston-based digital currency exchange Circle to provide similar services for John Doe subpoenas.

The California statute does not charge Kraken with any wrongdoing related to its digital currency exchange business. Instead, according to the court order, the subpoena seeks information regarding the IRS's "investigation of an identifiable group or class of persons" that the IRS has reasonable grounds to believe "may not be in compliance with the Internal Revenue Code." According to a copy of the subpoena filed, the IRS directed Kraken to produce transaction records and other related documents to identify the actions of the U.S. taxpayers mentioned above.

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