And the hits just keep on comin’ for Bitcoin.
Apparently, some folks are not being very forthright with the IRS when it comes to their Bitcoin trading habits where “not being forthright” means not reporting possible profits derived as a result of that trading. Imagine that, right?
In order to remedy this situation, the IRS served a summons on Coinbase seeking records on almost all of the company’s customers for the 2013-2015 period.
Specifically, only “800-900” taxpayers “electronically filed a Form 8949 that included a property description that is likely related to bitcoin” in each of those years.
That’s a problem because during those same years, “more than 14,000 Coinbase users either bought, sold, sent or received at least $20,000 worth of bitcoin.” Given that the price of Bitcoin only goes one direction (up) the IRS came to the common sense conclusion “that many Coinbase users may not be reporting their bitcoin gains.”
But Coinbase wasn’t loving that, because after all, the whole point of Bitcoin is that it’s decentralized, so when you go handing over account information for all of your customers it kind of dents your reputation as a company that can keep a secret when it comes to what exactly is going on in the shadowy world of cryptocurrencies.
So Coinbase refused to comply. Enter IRS agent David Utzke, the senior revenue agent in the IRS’s offshore compliance initiatives program whose job it is to handle “virtual currency matters.”
“[We are] conducting an investigation to determine the identity and correct federal income tax liability of United States persons who conducted transactions in a convertible virtual currency,” Utzke explains, in rather straightforward terms.
Eight months after the initial summons, the government filed a modified version and Coinbase refused to comply with that one too. Back in March, Coinbase decided to try and resolve this issue with the IRS but talks were broken off four months later.
Ultimately, a federal judge in San Francisco has now ruled that Coinbase must give the IRS identifying information, although if you read the order embedded below, parts of the government’s petition were denied.
So I guess you can spin this however you want if you’re Coinbase, but the bottom line is this:
Coinbase is ORDERED to produce the following documents for accounts with at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013 to 2015 period:
- the taxpayer ID number,
- birth date,
- records of account activity including transaction logs or other records identifying the date, amount, and type of transaction (purchase/sale/exchange), the post transaction balance, and the names of counterparties to the transaction, and
- all periodic statements of account or invoices (or the equivalent).
Make of that what you will, but the crypto community isn’t thrilled.
“We remain deeply unsatisfied with the lack of justification provided by the IRS,” Coin Center’s Peter Van Valkenburgh told The Verge. “Without better rationale for why these specific transactions were suspect, a similarly sweeping request could be made for customer data from any financial institution. It sets a bad precedent for financial privacy.”
Yes, “a bad precedent for financial privacy.” Or, in other words, “a bad precedent for screwing over other taxpayers by not paying what you owe on the profits you made.”