U.S. court authorizes IRS to identify tax evaders from crypto-exchange Kraken

In a bid to crackdown on tax dodgers, a U.S. federal court has authorized the Internal Revenue Service (IRS) to start summoning digital assets owners and traders on cryptocurrency exchange Kraken and its subsidiaries.

The U.S. federal court of Northern District of California granted permission to IRS to seek information from Payward Ventures Inc, the parent company of Kraken, on those who have transacted at least $20,000 in crypto on the exchange, between 2016 and 2020, according to a press release on Wednesday.

The court approved John Doe summons seeking identities of U.S. taxpayers who engaged in business with or through the exchange and “may have failed to comply with internal revenue laws.” A John Doe summons is an approach used by the tax department to gather information on people or “ascertainable group or class of persons” it can not identify by name.

“There is no excuse for taxpayers continuing to fail to report the income earned and taxes due from virtual currency transactions,” said IRS Commissioner Chuck Rettig. “This John Doe summons is part of our effort to uncover those who are trying to skirt reporting and avoid paying their fair share.”

The release mentioned that the court does not allege that Kraken has engaged in any wrongdoing in connection with its digital currency exchange business.

The IRS tax guidance has been reissued, stating that the “virtual currency” or the cryptocurrency will be as “property”, with all the relevant accompanying federal tax.

Last month, the U.S. federal court in the District of Massachusetts authorized IRS to summon tax-evaders who transacted over $20,000 between 2016 and 2020 in cryptocurrency payments firm Circle Internet Financial Inc and Poloniex LLC.

Picture Credit: Accounting Today