The Internal Revenue Service in the United States is now targeting customer records from cryptocurrency exchange Kraken. This comes after the court authorized the federal agency to obtain data from Circle’s customers. The IRS claims that this move is to uncover further those who are failing to report their crypto transactions properly. After getting court authorization to obtain records of Circle’s customers, the US Internal Revenue Service (IRS) is now targeting Kraken’s user data. IRS to refile request with a narrowed scope The IRS’ request to serve Circle Internet Financial Inc. a John Doe summons “” a term coined by the federal agency to conduct investigations when the identification of the taxpayer is unknown “” was approved by a federal court in Massachusetts less than a week ago. The IRS requested documents from Circle and its subsidiaries, including cryptocurrency exchange Poloniex to check if the digital currency users have been paying their taxes in full. According to IRS Commissioner Chuck Rettig: The John Doe summons is a step to enable the IRS to uncover those who are failing to properly report their virtual currency transactions. We will enforce the law where we find systemic non-compliance or fraud. Filing for a similar request with the United States District Court for the Northern District of California for the IRS, the Department of Justice looks to reveal customer records from cryptocurrency exchange Kraken. Similarly, the federal agency aims to identify the US taxpayers who transferred $20,000 or more through cryptocurrency transactions between 2016 to 2020. Further, IRS agent Karen Cincotta said that the request is part of an investigation to identify and correct federal income tax liability. The court responded to the request, citing that the government’s request was “overbroad” and would have to narrow down its request in its refiling. While the court found that basic registration, identification, and transaction information were relevant, other requests were too broad. The court deemed that the request includes “broad categories of information,” such as “complete user preferences, any other records of know-your-customer due diligence,” and “correspondence between Kraken and the user or any third party with access to the account pertaining to the account.” The IRS defended by saying that this information could be relevant to identifying a user’s account or multiple accounts. The judge told the federal agency in response that it “should first review basic user information and transaction histories before determining whether further subpoenas “” either to the cryptocurrency exchange or to individual users “” were necessary.” By April 14, the IRS will need to file a “narrowly tailored” version of its request. John Doe summons are not new to cryptocurrency exchanges. Coinbase has previously pushed back on the IRS’ John Doe summons to obtain user records from Coinbase between 2013 to 2015. IRS warns crypto holders to pay taxes In 2014, the IRS decided that Bitcoin and other cryptocurrencies should be treated as “property,” which qualifies for capital gains tax similar to traditional assets such as stocks and bonds. However, there are a few instances where activities involving digital currencies could be treated as income. Cryptocurrency capital gains tax applies for the selling and buying of the new asset class for fiat, the use of cryptos for goods and services, as well as trading or swapping one cryptocurrency for another. On the other hand, income tax events include receiving cryptocurrencies from an airdrop, interest earnings from DeFi lending, crypto mining from block rewards and transaction fees, and receiving crypto as a form of payment from carrying out work. More than 10,000 taxpayers who may have failed to report cryptocurrency income and pay taxes owed were sent letters from the IRS in 2019. FX Street FX Street FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions. View All Post By FX Street Crypto News share Read Next EUR/JPY Price Analysis: Looks set for further downside, rising wedge in focus FX Street 1 year The Internal Revenue Service in the United States is now targeting customer records from cryptocurrency exchange Kraken. This comes after the court authorized the federal agency to obtain data from Circle's customers. The IRS claims that this move is to uncover further those who are failing to report their crypto transactions properly. After getting court authorization to obtain records of Circle's customers, the US Internal Revenue Service (IRS) is now targeting Kraken's user data. 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