UPDATE: On August 15, 2022, Judge Otis D. Write II in the Central District of California entered an order approving service of the summons by the IRS on sFOX for account and transaction records. The Department of Justice entered a press release the following day with Commissioner Chuck Rettig quoted as saying “the John Doe Summons remains a highly valuable enforcement tool that the U.S. government will use again and again to catch tax cheats and this is yet one more example of that.” Deputy Assistant Attorney General David A. Hubbert of the Department of Justice Tax Division was also quoted as well saying “taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable.”
The IRS knows it has a problem, in that it knows there are far more cryptocurrency transactions than are being reported on tax returns. The IRS may also get an $80 billion increase in funding for enforcement that will help solve that problem. What can taxpayers and cryptocurrency service providers expect? More John Doe Summonses. If there was any doubt, the IRS filed two new John Doe Summons requests (here and here) this week on cryptocurrency service provider sFOX. sFOX is the full-service crypto prime dealer for institutional investors, providing brokerage services for digital assets. It’s also now a target for information by the IRS and the Department of Justice Tax Division.
Continue Reading IRS Continues to Hunt for Cryptocurrency Investors with John Doe Summonses
Cryptocurrency holders often want to put their assets into an entity for a host of reasons, such as asset protection, arranging negotiated management rights and exit planning. This post discusses basic federal income tax issues related to holding cryptocurrency inside a partnership (meaning any entity taxed under Subchapter K* of the Internal Revenue Code; the “Code’).
Cryptocurrencies might, simplistically, be defined as virtual currencies that use cryptography to secure transactions which are digitally recorded on a widely distributed ledger. The ledger technology uses independent digital systems to timestamp and harmonize transactions. The cryptocurrencies associated with a ledger are often called “coins” or “tokens”.
One of the most powerful tools in the Internal Revenue Service arsenal is the John Doe summons. However, as we all learned from Spider-Man, with great power comes great responsibility.
The IRS has several tools in its arsenal to encourage compliance and audit and enforce those it believes are failing to comply. One of the most powerful tools is the John Doe summons. A regular IRS summons seeks information on a specific taxpayer. However, a John Doe summons, as the name implies, involves a group of taxpayers that the IRS cannot identify by name – yet. Judicial approval is required, but the approval is ex parte (i.e. opposing parties are not notified or can respond before the court rules). The IRS has used this tool to find tax shelter participants by summonsing the promoters, and most famously 
The battle outside ragin’
What do professional athletes, punk artwork and digital kittens have in common? They are all part of the expansion of valuable collectible assets using cryptocurrency and blockchain technology. You can collect digital items for your favorite 
Cryptocurrency is more accessible than ever before. Banks are continuing to both implement procedures for and, in some cases, develop their own cryptocurrencies.