The IRS has a legal tool called a John Doe summons that compels third parties to produce records about unnamed taxpayers. They have used it aggressively against cryptocurrency exchanges. If you traded on a U.S. exchange, assume the IRS has your transaction data.

The Coinbase Summons

In 2016, the IRS served a John Doe summons on Coinbase seeking records for all customers who transacted between 2013 and 2015. After litigation, a federal court narrowed the scope but still required Coinbase to produce records for over 14,000 accounts with transactions exceeding $20,000. The IRS then matched these records against filed tax returns. Taxpayers who had Coinbase activity but did not report it were flagged.

Kraken, Circle, and Beyond

The IRS served a similar summons on Kraken in 2021, seeking records for all users who transacted more than $20,000 in any year from 2016 through 2020. Circle received a summons covering USDC transactions. The pattern is clear: the IRS is systematically obtaining records from every significant exchange. Smaller exchanges and foreign exchanges with U.S. customers are next.

What the IRS Receives

Exchange records typically include your name, address, Social Security number, date of birth, transaction history (buys, sells, trades, deposits, withdrawals), and in many cases your linked bank account information. This is comprehensive data. Combined with blockchain analytics that track on-chain movements after withdrawal, the IRS can construct a nearly complete picture of your crypto activity.

What Happens Next

The IRS matches exchange data against filed returns. If you reported your crypto income, no action is taken. If you did not, you may receive a CP2000 notice (automated underreporter), a letter requesting amended returns, or a notification of examination. In cases involving large unreported amounts, the matter may be referred to Criminal Investigation.

Your Response

If you have unreported crypto income from any exchange that has received an IRS summons, the time to act is before you receive a notice. Voluntary correction carries dramatically lower penalties than responding to an IRS inquiry. Attorney Darrin T. Mish evaluates your exposure and implements the correction strategy that produces the best outcome — and he has been doing this for 32 years.