back to article Open up, it's the IRS. We're here about the crypto tax you dodged

The IRS has been granted a court order to collect records from a bank the agency said will help it identify US taxpayers who failed to report taxable income from crypto trades.  Uncle Sam yesterday said it's specifically going after records from New York-based bank M.Y. Safra, which partnered with SFOX – a cryptocurrency prime …

  1. Cav Bronze badge

    Seriously? Is the writer of this logically challenged?

    At least 10 could be far more and if the transactions are in the billions then the amounts substantial.

    Is this another anti-gubmint American writer? What happened to El Reg and at least somewhat sensible UK writers?

    Countries run on taxation. If you are raking in thousands, millions or billions from crypto then you need to pay your share.

    1. DS999 Silver badge

      Yep, to get a judge to approve this the IRS needs to establish it isn't a fishing expedition. They must show a high likelihood that getting the info they want will result in finding unpaid taxes, with evidence why they believe that.

      I would bet they enumerated a few cases where people were audited for other reasons ("we see large sums of money moving in and out of your checking/debit accounts from another bank and this isn't remotely accounted for by your reported income, what gives?") and they found multiple people linked to that bank.

      So their petition to the court was probably "hey we found 10 people all linked to this bank and it looks like that is only the tip of the iceberg".

      1. Falmari Silver badge

        @DS999 "So their petition to the court was probably "hey we found 10 people all linked to this bank and it looks like that is only the tip of the iceberg"."

        No it probably did not. Otherwise the IRS statement would have said it found at least ten people linked to the bank rather than just linked to the broker as it is stronger justification for the warrant.

        "Further, IRS investigations have identified at least ten U.S. taxpayers who used SFOX’s services for cryptocurrency transactions but failed to report those transactions to the IRS as required by law."

    2. Alumoi Silver badge
      Joke

      About that, shall we pay the taxes in real money or in crypto? I'd vote for crypto and let the state take a hit trying to convert it to money.

      (and yes, that's the joke icon in case you missed it!)

    3. Falmari Silver badge

      Logically challenged?

      @Cav "Seriously? Is the writer of this logically challenged?"

      Short answer. No.

      Long answer. The IRS state this

      "SFOX has over 175,000 registered users who have collectively undertaken more than $12 billion in transactions since 2015."

      and this

      "Further, IRS investigations have identified at least ten U.S. taxpayers who used SFOX’s services for cryptocurrency transactions but failed to report those transactions to the IRS as required by law."

      So out of 175,000 the IRS has found 10* (0.006%) who failed to report transactions to the IRS. On the information provided by the IRS I can see the authors incredulity to the issuing of a John Doe warrant to SFOX. Especially when IRS statement also said this

      "There is no allegation in this suit that SFOX has engaged in any wrongdoing in connection with its digital currency business."

      *If the IRS had identified significantly more than ten, their statement would have reflected this, eg at least 20, 100, 1000 etc.

      1. Shalghar Bronze badge

        Re: Logically challenged?

        Maybe it is because i am a non native english user but there seems to be misinterpretation of the total sum in "transactions" that hints in the direction those "transactions" equal profits.

        "SFOX has over 175,000 registered users who have collectively undertaken more than $12 billion in transactions since 2015."

        Are commissions and fees part of that sum ? Is there any information how much of the gross transaction sum is indeed profit ?

        As far as i can see in cryptocurrencies, with the vast overhead of those brokers, banks and whatnot, i am not so sure that a significant percentage of the overglorified snowball/pyramid schemes called cryptocurrencies are really generating so much profit for the end user/"investor". Much less when transmuting the fairy gold pots back to "real" money.

        Then again, the total sum of unpaid taxes might not matter as much as the expected income due to exxagerated fines.

    4. Anonymous Coward
      Anonymous Coward

      On the other hand people trading crypto on these exchanges may in fact be honest and report their earnings in a timely manner which may indicate that KYC does the job it's supposed to.

      Just because you want people that deal with crypto to be criminals it doesn't make it so.

      What may actually be the case here is that the vast majority of people using these exchanges may not be making enough profit for their profit to be considered taxable...or those exchanges are tiny and don't have a lot of account holders.

    5. martinusher Silver badge

      >Countries run on taxation. If you are raking in thousands, millions or billions from crypto then you need to pay your share.

      Life would be good if you could pay the IRS in cryptocurrency but unfortunately they want cash or cash equivalent. That means that if you're trading a highly volatile security, even indirectly, you are quite likely to trigger taxable events that will require virtual -- and fleeting -- profits to pay tax in hard cash.

      Cryptocurrency isn't the only way you can get caught like this but its possibly the one area where a significant number of people have dabbled in unregulated, volatile, securities without having a clue what they're doing. The lessons are going to be hard and expensive. The people affected will complain that its not fair and they don't believe in The Man or whatever but its not going to change anything.

  2. Anonymous Coward
    Megaphone

    Good on the IRS

    If you sell anything at a profit, you have to report it on your tax return. Crypto is no different than Pokemon cards or anything else.

    Note that if you file your profits, you are also allowed to file your losses to offset them. Again, just like anything else.

    The idea that because crypto doesn't want to be taxed it shouldn't be audited is absurd.

    1. Oglethorpe

      Re: Good on the IRS

      There's quite a few exempt items. For example, mechanical items, with watches and classic cars being very common tax dodges in the UK. You can also do dodgy stuff like investing your capital gains in art, taking a loan out secured on the value of the art, then spending the money having paid no capital gains tax.

      1. This post has been deleted by its author

      2. Anonymous Coward
        Anonymous Coward

        Re: Good on the IRS

        >You can also do dodgy stuff like investing your capital gains in art, taking a loan out secured on the value of the art

        Surely they'll be putting profits into NFTs and borrowing bitcoin against them?

    2. Anonymous Coward
      Anonymous Coward

      Re: Good on the IRS

      Who on earth said crypto doesn't want to be taxed?

      What crypto wants, and a lot of people will agree, is to be taxed fairly as with anything. The guidance on crypto taxation is woolly at best and hard to comprehend for an average person at worst.

      Seriously, the mental gymnastics anti-crypto people subject themselves to are astounding.

      1. katrinab Silver badge
        Meh

        Re: Good on the IRS

        I don't know about the US, but in the UK, crypto trading is taxed in basically the same way as currency trading. Mining is taxed in the same way as manufacturing / producing and selling any other product.

    3. Anonymous Coward
      Anonymous Coward

      Re: Good on the IRS

      Good on them? They probably spent more money than they recouped in this retarded escapade.

  3. Jan K.

    What? Crypto and fraud?

    Now I never...

    1. This post has been deleted by its author

      1. BebopWeBop
        Devil

        Just another opportunity to lie.

        1. This post has been deleted by its author

  4. An_Old_Dog Silver badge
    Thumb Down

    "May Have" is an Insufficiently-High Standard of Justification

    "may have not been reported properly", said the IRS. That's a flimsy excuse for going on a fishing expedition.

    Sundar Pichai may have broken into my house and eaten the last bag of crisps in my cupboard, but the plods surely aren't going to grab his phone's GPS location data to prove his possible guilt, based only on that statement.

    1. Richard 12 Silver badge

      Re: "May Have" is an Insufficiently-High Standard of Justification

      Means "suspected but not proven".

      It's one of several ways of paying lip service to "innocent unless proven guilty".

      In this case, it appears that the IRS are pretty sure that there is significant unpaid tax, but don't know who should have paid it

      Presumably they looked at the blockchain and the published figures for the exchange, and believe that indicates several entities subject to US have made significant profits that haven't been declared.

      They can't prove who without that additional data, so they asked a judge.

      1. Michael Wojcik Silver badge

        Re: "May Have" is an Insufficiently-High Standard of Justification

        Indeed. That's the entire purpose of a warrant. You show reasonable justification, as determined by a judge, to look for more evidence.

  5. Anonymous Coward
    Anonymous Coward

    That said, there are _many_ people who use cryptocoins for legit purposes, and pay due income taxes on it.

    int8 many ;

    That should about cover it.

    1. Michael Wojcik Silver badge

      Yes. That sentence wants a big ol' [citation needed], doesn't it?

      1. diodesign (Written by Reg staff) Silver badge

        Good crypto use

        Nah, see Register passim. I stand by it.

        Of the high volumes of cryptocurrency transactions, only a small percentage is involved in crime.

        C.

  6. BarbaraBlinka

    A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It is a decentralized system for verifying that the parties to a transaction have the money they claim to have, eliminating the need for traditional intermediaries, such as banks, when funds are being transferred between two entities.

    If This is a Decentralized System That Isn't Reliant on Any Central Authority Such as a GOVERNMENT OR BANK...

    Why Have Data of Transactions From 2015 Till Date..?

    Why Demanding / Imposing Tax on a Decentralized System..?

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