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NY bank ordered to share client user data in IRS crypto tax probe

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The Internal Revenue Service (IRS) has issued a court summons forcing M.Y. Safra Bank to share the details of a client’s users in order to crack down on tax evasion in relation to crypto transactions.

The Department of Justice (DoJ) announced that a District Judge gave the IRS permission to issue a “John Doe” summons towards Safra Bank who currently offers their services to crypto prime broker SFOX.

A John Doe summons refers to an unidentified defendant in a case, in this example the unknown SFOX users who potentially aren’t paying taxes on their crypto transactions.

The IRS is eyeing SFOX over potential crypto transactions that fail to obey US crypto tax laws. The issued summons will force Safra Bank to provide the IRS with SFOX user records that may help identify unknown users that are potentially failing to file their crypto gains in their taxes.

Read more: Michael Saylor called tax cheat after spending too much time in DC

At least ten US taxpayers that rely on SFOX for its crypto trading failed to report their transactions to the the agency according to the press release.

“The government is committed to using all of the tools at its disposal, including John Doe summons, to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share,” attorneys stated (our emphasis).

IRS investigating SFOX crypto transactions

SFOX is a crypto trading platform that currently deals with 175,000 users and has facilitated ~$12 billion worth of transactions since 2015. The New York bank offers SFOX users cash-deposit bank accounts where funds can be used to buy and sell positions in crypto.

To support the summons, the IRS is claiming that users who hold crypto typically fail to report their tax returns on any profits made from crypto.

Read more: Ignorance no excuse: IRS to hunt NFT tax cheats for billions of dollars

The IRS says it lacks third-party reporting and that John Doe summons typically reveal crypto dealers are significantly failing to report crypto transactions to the IRS. 

“The information sought by the summons approved today will help to ensure that cryptocurrency owners are following the tax laws,” officials said.

The DoJ makes it clear that summonses does not implicate Safra Bank in any wrongdoing. 

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  • Source: https://protos.com/ny-bank-ordered-to-share-client-user-data-in-irs-crypto-tax-probe/
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