2021-04-15 19:03:16

A Warning To Cryptocurrency Users From The Justice Department’s Tax Division – Technology


United States:

A Warning To Cryptocurrency Users From The Justice Department’s Tax Division


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As you might expect during tax season, the Justice
Department’s press releases seem particularly focused on
tax-related issues these days.  At the start of this
month, DOJ sent a stern reminder to the
public
 that non-traditional currency users should not
expect to escape federal tax law enforcement.

On April 1, the district court for the District of Massachusetts
authorized a “John Doe” Summons to a company called
Circle Internet Financial Inc. (“Circle”), allowing the
IRS to obtain identifying information about U.S. taxpayers and
customers of Circle who engaged in cryptocurrency transactions
valued at $20,000 or more over the last 4 years (from 2016-2020),
as well as their transaction records.  The government’s
application did not accuse Circle or any of its customers of
wrongdoing.  Instead, as reported in its announcement, the
government argued that cryptocurrency can be difficult to trace and
has an “inherently pseudo-anonymous aspect,” which makes
it possible for taxpayers to use it to hide taxable income. 
Granting the government’s application, U.S. Judge Richard G.
Stearns found that there was a “reasonable
basis for believing that [Circle’s cryptocurrency customers] .
. . may have failed to comply with [federal tax laws].”
 It is expected that the IRS will use the information obtained
through this John Doe Summons to further its investigation of
potential tax fraud by owners of cryptocurrency.

The Summons and accompanying press release warn all
cryptocurrency users that virtual currency which can be converted
to traditional currency is subject to federal
tax laws and that the IRS plans to root out those who may try to
hide reportable income through difficult-to-trace virtual
transactions.  Guidance from the IRS on tax treatment of
cryptocurrency can be found here.


A Warning To Cryptocurrency Users From The Justice Department’s
Tax Division

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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