The Tax Service (IRS) of the United States wants to know the identity of the resident investors of that country who have bought or exchanged, in the exchange Circle and its subsidiaries, the equivalent of more than USD 20,000 in cryptocurrencies from 2016 to 2020.
According to a circular published by the Department of Justice, the purpose is to identify investors who have exchanged cryptocurrencies equivalent to that amount, in that period, without reporting it to the United States tax authorities. So they plan proceed with the collection of the corresponding taxes, per IRS regulations.
Circle Internet Financial Inc. operates the exchange Kraken and the exchange operated until 2019 Poloniex, but the federal authorities of the District of Massachusetts are required to reveal the identity of all US users who have used these exchanges.
Circle is located in the city of Boston, where a federal court issued authorization to the IRS to apply the measures to both that company and to all of its affiliates, predecessor companies, subsidiaries and business divisions.
Those who transact with cryptocurrencies must meet their tax obligations just like other tax payers. The Department of Justice will continue to work with the IRS to make sure crypto owners are paying their fair share of taxes.
Assistant Attorney David A. Hubbert, Department of Justice Tax Division.
The court document expresses how the pseudonymous nature of most cryptocurrencies, as a “digital representation of value,” it can make it easier for users to conceal income that is taxable by the IRS. Judge Richard G. Stearns acknowledged this argument and finds that indeed, “cryptocurrency users may have failed to comply with federal tax laws.”
The ordinance is made under the figure of “John Doe”, a term used in the United States judicial sphere to refer to measures to which one or more persons not fully identified by the authorities would be subjected. While the ordinance does not argue that Circle engaged in bad practices, it does consider that this exchange could provide the requested information.
Taxes must be collected as stipulated in IRS resolution 2014-21, which regulates the payment of taxes with cryptocurrencies following the regulations of the entity.
As reported by Forbes, a similar process based on the figure “John Doe” was applied to Coinbase in 2016, with the same objective (reveal identities, collect taxes). Since then, the IRS has been contacting identified investors to comply with US law.
As reported by CriptoNoticias, in the tax return corresponding to 2020, users who have bought or acquired cryptocurrencies before that year, would not have to declare them in the following fiscal year.
According to a provision issued last March, the period assigned to individuals to file their taxes was extended by the Treasury Department and the IRS from its deadline, April 15, until May 7, 2021. Consequently, There is still a chance to organize and file the tax return for residents of the United States corresponding to the last fiscal year.