Crypto Cos. Should Prep For More IRS John Doe Summonses

May 23, 2022Law360

Herrick partner Shivani Poddar and associate Andrew Heighington authored an article for Law360 on the Infrastructure Investment and Jobs Act and the upcoming reporting requirements for cryptocurrency companies. In light of the new reporting requirements, they anticipate that the IRS will undoubtedly turn to a unique mechanism to obtain expansive information about cryptocurrency transactions ⁠— the John Doe summons. A John Doe summons is issued when the IRS reasonably believes an "ascertainable group or class of persons" has failed to comply with tax laws correctly. 

They wrote, "In recent years, the IRS has issued John Doe summons to obtain information from cryptocurrency exchanges, a practice that is likely to expand given the infrastructure bill's reporting requirements." 

The pair advised, "Cryptocurrency exchanges and custodians should become familiar with the summons and the rules surrounding its issuance, and consider arguments for narrowing such requests. Individuals should also be aware that, apart from being subject to their own reporting requirements, their account information and transaction history on various cryptocurrency exchanges and with financial institutions may be subject to disclosure."

Read the full article on Law360 here or below.