The Internal Revenue Service (IRS) has required cryptocurrency exchange Kraken through a federal court order to provide account and transaction information.
According to a June 30 court filing, the IRS needs information on Kraken accounts that traded at least $20,000 in cryptocurrency over the course of a year, which applies to active users between 2016 and 2020.
The IRS initially filed a petition regarding Kraken in the Northern District of California in February. This petition case, shortly after the exchange settled charges brought by the US Securities and Exchange Commission saying it violated securities law with its storage service. In the filing, the IRS said it gave Kraken a recall in 2021 but failed to comply.
Latest Kraken to request It requires the exchange to provide information on its users who transacted with more than 20,000 in a year between January 1, 2016, and December 31, 2020. The information is expected to capture a user’s name, date of birth, address, telephone number, email address, taxpayer identification number, and other documents. In addition, they will provide on-chain information, such as the user’s blockchain address and transaction hash, which may give raw data to the IRS.
However, Judge Joseph Spiro overturned the IRS’ request to provide employment details of Kraken users and their source of wealth. He stressed the need to narrowly tailor the recall to what was necessary to achieve the intended purpose.
The IRS has been after Kraken since 2021
The IRS has been on Kraken’s radar since May 2021, when it attempted to obtain its records. The case began in February 2023 when the IRS attempted to enforce the 2021 subpoenas. In April, Kraken challenged the IRS application claiming that the claims represented unwarranted interference, and therefore the federal court had to intervene.
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Kraken is one of several exchanges that the IRS has requested data from. The agency obtained data from Circle, Coinbase, and SFOX.
Recent surveys indicate that most cryptocurrency investors refrain from paying taxes on their profits despite the rule in place. Hence the IRS is taking steps to curb these actions. Meanwhile, the subpoena comes a day after President Biden directed to eliminate loopholes in the crypto tax space to promote a fair tax share for all.