The IRS is looking into Kraken over potential user tax evasion. The agency has obtained a court order to force the exchange to provide account and transaction information.
The IRS has issued a subpoena to Kraken seeking user identification data for everyone who transacted at least $20,000 worth of cryptocurrencies in a single year between January 1, 2016, and December 31, 2020.
The court document states that the court ordered Kraken to give the IRS user information.
Kraken’s records are not always up-to-date when it comes to hard forks and chain splits. This is because these events can cause changes in user holdings that are not immediately reflected in Kraken’s systems. To ensure that the IRS has accurate information, Kraken must provide additional on-chain information.
Kraken is still under investigation. However, only those transactional documents that did not fall within the government’s overbroad demands must still be provided.
The IRS has been chasing Kraken’s user records for over a year. In May 2021, the agency was granted permission to serve a summons on the exchange, but Kraken refused to comply. The current case began in February 2023, when the IRS attempted to enforce the summons.
Judge Spero has rejected some of the IRS’s requests for information from Kraken, including employment and source of wealth details. He believes that the summons was too broad and exceeded what was necessary to identify the majority of the Doe users.
The IRS is making it clear that they are serious about enforcing cryptocurrency tax laws. They have already obtained data from Coinbase, Circle, and SFOX, and they are likely to go after more exchanges in the future.
Most crypto investors don’t pay taxes on their investments or earnings, even though there are rules in place. The IRS is taking action against crypto exchanges to try to change this.
