USA v Doe Kraken (cryptocurrency) open your kimono and disclose which Americans are...
MUsing your service to evade taxes ...you can’t claim to be an American Patriot and fail to file your tax returns. Tax Cheats are criminals. Period.
IRS and Virtual Currency aka cryptocurrency;
Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as “convertible” virtual currency. Bitcoin is one example of a convertible virtual currency. Bitcoin can be digitally traded between users and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies.
Tax Consequences for Individuals
The sale or other exchange of virtual currencies, or the use of virtual currencies to pay for goods or services, or holding virtual currencies as an investment, generally has tax consequences that could result in tax liability.
The IRS issued IRS Notice 2014-21, IRB 2014-16, as guidance for individuals and businesses on the tax treatment of transactions using virtual currencies.
The IRS also published Frequently Asked Questions on Virtual Currency Transactions for individuals who hold cryptocurrency as a capital asset and are not engaged in the trade or business of selling cryptocurrency.
Additionally the IRS published the “general tax principles that apply to virtual currencies” previous IRS Publications can be found below:
Publication 525, Taxable and Nontaxable Income, for more information on miscellaneous income from exchanges involving property or services,
Publication 526, Charitable Contributions, for more information on charitable contribution deductions,
Publication 544, Sales and Other Dispositions of Assets, for more information about capital assets and the character of gain or loss,
Publication 551, Basis of Assets, for more information on computation of basis, and
Publication 561, Determining the Value of Donated Property, for more information on the appraisal of donated property worth more than $5,000.
In 2019 and 2020
I created numerous threads and occasionally said “hello - you need to pay attention because this is a case of first impression” oh you’d like to see my Twitter Archive Receipts?
July 2020 Supplemental Twitter Thread - also archived - where I walked you through the importance of the DDC Order/Memorandum
2 issues of first impression BFD -BITCOIN IS MONEY -HELIX is a MTB “concludes that bitcoin is money under the MTA and that Helix, was an “unlicensed money transmitting business” under applicable federal law... defendant’s motion to dismiss Counts Two and Three is denied”
Payward Ventures Inc & Kraken
Paywars/Kraken Twitter Archive
Kraken Exchange main Twitter account archive -again I’m not saying that Kraken has done anything wrong but the KYC and BSA/AML ramifications could be impactful and it’s clear the IRS’ investigation appears to be growing. Last month it was Circle. Whereas this month it’s Kraken -
According to the recent Kraken Support page: “Kraken does not provide tax forms or statements,,” and perhaps this is an anomaly but I’m curious why Kraken’s algorithm defaulted to Australian Currency -last I checked my IP is in the United Stares - meh maybe I’m reading too much into it.
Kraken must be released…
Per today’s DOJ-OPA Press Release - which reads in part:
authorizing the IRS to serve a John Doe summons on Payward Ventures Inc., and Subsidiaries d/b/a Kraken (Kraken) seeking information about U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency during the years 2016 to 2020.
…due the the anonymous nature baked into cryptocurrency - this can thwart law enforcement to fully unmask various individuals using cryptocurrency to essentially evade taxes. Today’s order allows the IRS in their investigatory endeavors. Specifically seeking the records of Americans who have engaged in business transaction with or through Kraken, a digital currency exchanger headquartered in San Francisco, California.
Today’s Order via ECF https://ecf.cand.uscourts.gov/doc1/035120557123
Relavant Court filings
To say this is a big deal might be an understatement1 - Today’s summons seeks information related to the IRS’s “investigation of an ascertainable group or class of persons” that the IRS has reasonable basis to believe “may have failed to comply with any provision of any internal revenue laws[.]”
A copy of the summons filed with the petition, the IRS is requesting that Kraken produce records identifying the U.S. taxpayers, along with other documents relating to their cryptocurrency (history) of transactions
USA v Doe Kraken - Docket no. 8 response to order to show
“The John Doe summons the IRS seeks to serve on Kraken is part of an ongoing, extensive investigation involving substantial IRS resources that is producing real results – millions of dollars in previously unreported and unpaid taxes recovered for theTreasury to date. And the summons seeks information that is needed to identify taxpayers who may not be complying with the law”
Kraken - Docket no. 8-1 second declaration of Karen Cincotta;
The IRS is conducting an investigation to determine the identity and correct federal income tax liability of U.S. persons who conducted transactions in cryptocurrency for the years ended December 31, 2016, 2017, 2018, 2019, and 2020.
Kraken - Docket no. 8-2 revised summons attachment - EXHIBIT B
Who boy - take a look at what the Court’s Order encompasses - full disclosure I haven’t read all of the filings embedded in this article but below are a few highlights
“User” is defined as each Kraken user for which your records show any United States-based address, telephone number, e- mail domain, internet protocol address, or associated bank or financial account information, produce the following records, for any combination of accounts with at least the equivalent of $20,000 in value of transactions (regardless of type) in cryptocurrency in any one year, for the period January 1, 2016 through December 31, 2020
i. Name (including full name, any pseudonym, or any user ID);
ii. Date of Birth;
iii. Taxpayer Identification Number
iv. PhysicalAddress;
v. Telephone Number
Take a close look at what I highlighted on page 2 of Exhibit B - because this is more important than most would think at first glance:
b….of any lending, borrowing, or margin position entered into in the account;
c. Records identifying the date and time, amount, U.S. dollar value, transaction hash (ID), and blockchain addresses for cryptocurrency units transferred into or out of the User’s account from another Kraken user or from outside of Kraken.
d. Records identifying the date and time, amount, and U.S. dollar value of any units of cryptocurrency received by the User in the account as a result of a chainsplitting event such as a hard fork or promotional event.
Additional tranche of Court Filings:
Kraken - Docket no. 9 - order granting petition as narrowed, Kraken - Ex parte petition - order to show cause, Kraken jds 01 - petition, Kraken jds 01-2 - declaration, Kraken jds 01-3 - exhibit A, Kraken jds 01-4 - proposed order, Kraken jds 02 - memorandum in support
Just pay your freaking taxes…
The IRS is not to be trifled with, if you fail to not only file your annual income tax but then you decide to use cryptocurrency to evade taxes. Eventually the IRS will come knocking. I genuinely wonder how stressed out folks like Steve Bannon, Matt Gaetz, Roger Stone and Trump et al are right now. I’m hoping they are freaking the bleep out but that might be wishful thinking on my end.
Question do GoFundMe campaigns qualify for taxable personal income? Asking for a friend -snort-
The IRS is on the hunt to identify Americans evading taxes and that just delights me, a lot. So for now I’d watch this space very closely or not. I might do a deeper dive later this week but for expediency I wanted to make sure my readers had the information “hot off the press”
-Filey
Previously (April 1, 2021) a federal court in the District of Massachusetts granted an order authorizing the IRS to serve a similar John Doe summons on Circle, a digital currency exchange headquartered in Boston
I hope we see a rather large number of people who dodged taxes get rolled up. Notable names even...even some Twitter trolls who got paid to troll via bitcoin. Gonna be interesting.
ooooooohhhhh... (rubbing hands together) this is gonna get gggoooooddd!!