In today’s episode of Adam Talks, Adam Bergman, Esq. discusses the Kraken-IRS battle, the John Doe summons, and the overreach of the IRS in terms of getting your crypto trading history.
Is the IRS Coming for Your Cryptos?
On this week’s episode, Adam Bergman discusses the ongoing battle between the IRS and cryptocurrency exchange Kraken over a John Doe summons. The IRS believes that many individuals have not been reporting their cryptocurrency transactions and paying taxes accordingly. The court ruling favored the IRS, granting them broad summons power but also limiting the scope of the summons. The conversation emphasizes the IRS’s focus on tax revenue rather than regulatory aspects of cryptocurrencies.
The SEC and CFTC focus on regulating crypto exchanges to protect consumers from fraud, while the IRS aims to ensure tax compliance. The IRS suspects that millions of taxpayers have not reported crypto transactions, leading to a loss in tax revenue. They seek information directly from exchanges to conduct audits, as they do not fully trust self-reporting on tax forms.
Kraken chose to fight the summons to protect customer data and limit compliance burden. However, it is difficult to squash an IRS summons due to the agency’s broad power. Bergman also delves into the challenges faced by businesses in complying with such requests, including the financial burden of legal fees.
This podcast highlights the potential consequences for small businesses, which may face bankruptcy due to compliance costs. Statistics support the IRS’s argument that only a fraction of taxpayers have reported crypto transactions. The IRS considers crypto as a capital asset and expects individuals to pay taxes on any gains made.
Bergman raises concerns about the broadness of the summons issued by the IRS. The court ruling grants the IRS access to customer data but limits their access to certain records. He also mentions the potential consequences for individuals whose information is obtained by the IRS, including audits and potential tax liabilities.
Bergman concludes by acknowledging the IRS’s intentions to ensure tax compliance in the cryptocurrency space. He emphasizes the need for individuals and businesses to report crypto gains, discusses the benefits of using retirement accounts, and expresses hope for future celebrations in the crypto space.
To learn more, please listen to the entire episode!