IRS to Serve Summons to Crypto Dealer SFOX Looking for Possible Tax Evaders

A California court has authorized the agency to serve a "John Doe" summons.

AccessTimeIconAug 16, 2022 at 6:18 p.m. UTC
Updated Aug 16, 2022 at 7:25 p.m. UTC

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

The Internal Revenue Service can serve a "John Doe" summons on crypto prime dealer SFOX, a court ruled Monday, allowing the tax agency to hunt for potential tax evaders who are using company's services.

The IRS has previously served such summons on companies like Kraken and Circle and typically does so when it wants to confirm whether the recipient's customers are properly reporting their taxes. Cryptocurrency transactions are taxed like property, with the IRS collecting capital gains tax on every transaction.

The court order, which was approved by a judge in the Central District of California, authorizes the IRS to serve the summons against SFOX, asking for information about any "U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency between 2016 and 2021 with or through SFOX." SFOX will be required to share any records identifying those users and their transactions through the service.

In a statement, IRS Commissioner Chuck Rettig said the tool is used to "catch tax cheats."

"I urge all taxpayers to come into compliance with their filing and reporting responsibilities and avoid compromising themselves in schemes that may ultimately go badly for them," he said.

The IRS press release pointed to crypto transactions' "inherently pseudo-anonymous aspect" in explaining the need for a John Doe summons. A a John Doe summons means the IRS doesn't know the specific identities of the potential tax evaders. SFOX itself is not accused of violating any laws.

An SFOX spokesman didn't immediately return a call for comment.

The IRS served a similar summons to crypto exchange Coinbase (COIN), which fought the order for a time.


Read more about

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

CoinDesk - Unknown

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

Investing in the Future of the Digital Economy
October 18-19 | Spring Studio, NYC