Crypto Taxes
Expert verified
5 min read

IRS Is Hunting Down Kraken and Circle Customer Information

IRS Is Hunting Down Kraken and Circle Customer Information
IRS Is Hunting Down Kraken and Circle Customer Information
Our Editorial Standards:
Our content is designed to educate the 500,000+ crypto investors who use the CoinLedger platform. Though our articles are for informational purposes only, they are written in accordance with the latest guidelines from tax agencies around the world and reviewed by certified tax professionals before publication. Learn More
on this page

On March 31, 2021 and April 1st, 2021, the IRS filed John Doe Summons targeting Kraken and Circle in effort to obtain customer information and crack down on crypto tax noncompliance. 

The summons seeks to force the cryptocurrency exchange operators to turn over records for customers who have transacted $20,000 or more through the respective exchanges during the years 2016 to 2020.

Chuck Rettig, the Chief of the Internal Revenue Service was quoted saying, “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 noncompliance or fraud.”

What is a John Doe Summons?

A John Doe Summons is a tool the IRS can use to conduct investigations for taxpayers with which it does not specifically know the name or identity. A judge can grant authorization of a John Doe Summons provided there's a reasonable basis to presume a group of people may have broken tax laws and if such information isn't accessible by other means.

If a summons gets approved, the third party with whom the summons is issued legally has to comply. 

Circle Information Request

A federal court within Massachusetts did approve of the IRS’s request to serve a John Doe summons to “Circle Internet Financial Inc., or its predecessors, subsidiaries, divisions, and affiliates, including Poloniex LLC (collectively ‘Circle’).”

Circle, who purchased popular cryptocurrency exchange Poloniex in 2018 then later spun it out of their core business, announced that it expects “to work collaboratively with the IRS” in complying with the John Doe summons.

Kraken Information Request

A judge in the Northern District of California did not grant approval of the summons for Kraken customer information stating that the request was “too broad”.

However, it’s likely that eventually the IRS will succeed in getting approval. The government agency will likely narrow the scope of its request and file a new version by April 14. 

History Repeats Itself

If any of this sounds familiar, it’s because it has happened before. In 2016, the IRS issued this exact same John Doe summons to Coinbase, and the exchange was forced to turn over records for approximately 13,000 customers.

Years later, the IRS sent warning and action letters to thousands of these customers whose data was turned over. 

What Happens Next?

The IRS is likely to receive information on tens of thousands of customers who pass the $20,000 transaction threshold from these John Doe Summons. From here, the agency will cross-reference the information reported with what got filed on tax returns.

We are likely to see more warning letters and audits come from these efforts in years to come.

IRS Commissioner Chuck Rettig stated that this “is a step to enable the IRS to uncover those who are failing to properly report their virtual currency transactions.” 

How To Report Cryptocurrency On Your Taxes

If you haven’t been reporting your cryptocurrency gains, losses, and income on your taxes, you can always amend a prior year's tax return to get in compliance. 

Reporting your cryptocurrency on your taxes is fairly straightforward. Capital gains and losses from your trading activity get reported on IRS Form 8949. This gets included with your 1040 Schedule D.

For a complete breakdown, checkout our step-by-step guide discussing How to Report Crypto on Your Taxes

Frequently asked questions

  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
Want to try CoinLedger for free? Claim your free preview tax report.

Join 500,000 people instantly calculating their crypto taxes with CoinLedger.

How we reviewed this article

Edited By

All CoinLedger articles go through a rigorous review process before publication. Learn more about the CoinLedger Editorial Process.

CoinLedger has strict sourcing guidelines for our content. Our content is based on direct interviews with tax experts, guidance from tax agencies, and articles from reputable news outlets.


Demystify Crypto Taxes

The Ultimate Crypto Tax Guide (2024)

This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.

Crypto taxes overview
Crypto Tax Rates 2024: Complete Breakdown

Here’s how much tax you'll be paying on your income from Bitcoin, Ethereum, and other cryptocurrencies.

Crypto tax rates
How Crypto Losses Can Reduce Your Taxes

Crypto and bitcoin losses need to be reported on your taxes. However, they can also save you money.

How crypto losses lower your taxes

Calculate Your Crypto Taxes

  • Check
    No credit card needed
  • Check
    Instant tax forms
  • Check
    No obligations
Get Started For Free
Jump to