The IRS 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 using company’s services.
The U.S. tax agency has previously served such summons on companies like Kraken and Circle, and typically does this when it wants to confirm whether the recipient’s customers are properly reporting their taxes. Cryptocurrency transactions are currently taxed like property, with the IRS collecting capital gains tax on every transaction.
The court order, 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 these 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 John Doe summons simply means the IRS does not know the specific identities of the potential tax evaders). SFOX itself is not accused of violating any laws.
The tax agency famously served a similar summons to crypto exchange Coinbase (COIN), which fought the order for a time.
