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Circle was quick to release a statement, ensuring that there would be full cooperation with IRS, and assuring their clients of the safety of their assets.
The IRS is no stranger to going after the tax records of cryptocurrency companies, in 2016, crypto company Coinbase was forced to eventually produce client records after a yearlong legal battle. This marked the end of an era in cryptocurrency, in which several malicious actors saw the newly developing cryptocurrency as a way to evade paying tax. In response to that attitude, the IRS is making sure the larger crypto firms, like Circle, are not aiding in tax evasion, and on Thursday, the Department of Justice served the well-known cryptocurrency firm Circle with a John Doe summons. This summons is to be enforced by the IRS, the tax regulatory body of the United States.
The court order allows the IRS to obtain records on any customers who have traded cryptocurrency assets worth up to $20k between 2016 – 2020, this order was served to Circle Internet Financial, all its associates, affiliates, divisions and departments, especially Poloniex LLC. Though it is important to note that the court order admits that Circle Internet Financial is not being accused of any crime whatsoever, and the action is simply an investigation into certain parties or people who may have failed to comply with tax laws.
Comments were made about the court order, Judge Richard Stearns, when he approved it, noted that there was sufficient cause for concern, that certain cryptocurrency holders may not be fully complying with tax laws. Circle was quick to release a statement, ensuring that there would be full cooperation with IRS, and assuring their clients of the safety of their assets.
Since Coinbase’s legal challenge, however, the tax supervisory body has adapted to the new rules of this financial development. Making sure that taxpayers who trade in crypto or carry out transactions involving cryptocurrency pay their taxes, has become one of the objectives of the IRS, they’ve added the option for taxpayers who carried out crypto transactions to the 1040 form. They have also sent several rounds of reminders out to cryptocurrency holders, to remind them that reporting tax remains a paramount duty of any taxpayer.