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Kraken Alerts Customers It Will Share User Data with IRS In November

Kraken Alerts Customers It Will Share User Data with IRS In November

If you are a Kraken cryptocurrency customer, you are now on alert that the exchange will be submitting user information to the IRS. This practice actually began with other exchanges as early as 2021, but as practices have become more streamlined and efficient, you should certainly expect that your data is currently accessible and at the IRS’s disposal.

The IRS has done studies which indicate a low percentage of people reporting their past cryptocurrency transactions. As a result, the IRS has turned to courts for help. In response, the Courts have issued summons for users’ sensitive data to be shared with the IRS.

 

The IRS and its Ultimate Goal

The nature of cryptocurrency transactions is being anonymous, resulting in low number of taxpayers reporting these transactions This poses a problem for the IRS as they are trying to curtail tax evasion.

For example, to stop taxpayers from expatriating and repatriating US funds to and from offshore accounts, the Electronic Payments Systems Initiative was enacted in 2005. The Electronic Payments Systems has been successful in collecting taxes and educating taxpayers of the implication of tax avoidance. Now, the IRS has established the Virtual Currency Issue Team to spearhead the tax compliance for cryptocurrencies.

As for the Kraken summons, the court has ordered the exchange to provide the IRS with customer and transaction data, including names, birthdates, taxpayer identification numbers, phone numbers, addresses, email addresses, blockchain addresses, and transaction hashes for accounts having at least $20,000 in transactions between 2016 and 2020.

Once the IRS has identified the individuals, the agency will then start matching up people with their tax information and taking appropriate actions against those who have avoided tax payments. These actions may be civil and criminal investigations.

 

Dallo Law Group

The IRS has a strict policy against tax noncompliance and is able to use automated processes to audit mismatches with 1099s and information returns. Thus, crypto traders that have not reported these transactions will likely face penalties.

Our tax attorneys at Dallo Law Group have made it top priority to understand and educate our clients on the tax implications of cryptocurrency, including reporting requirements on tax returns. Our attorneys and CPAs can assist you with your cryptocurrency obligations before you are faced with penalties, an IRS audittax fraud, or even a prison sentence.

The IRS is actively scouting out investor information from Kraken, among others. In addition, some people have even reported getting warning letters from the agency while being put on alert. If you happen to have received such a letter, or are an active investor with cryptocurrency, do not wait to reach out to Dallo Law Group. We will help you accurately report your taxable income and/or assist you through your audit. Our experience and our strategic decisions can guide you through the best course of action against the IRS. As always, our consultation is free, and we will provide you with an honest assessment for your situation.