The debacle between Coinbase’s IRS Summons and its user base are from resolved. Even though one of the exchange’s customers wants to intervene in this federal case, it remains doubtful they can block the IRS from investigating their customer records. But that doesn’t mean all hope should be abandoned, as it would not be the first time someone successfully counters an IRS investigation through court.
The IRS-Coinbase Story Continues
It is important to understand the IRS does not need a clear cause for potential tax evasion investigation. As soon as they suspect something could be amiss, they can go through the legal system and file a request for more information. In this day and age, the IRS can examine any information that could be relevant to their investigation, even if it turns out their suspicions were unwarranted.
Rest assured the Coinbase user base is not too happy about this investigation, as they feel the government is invading their privacy when it comes to Bitcoin transactions. Considering how this John Doe summons could impact over 1 million taxpayers, the IRS is setting a very dangerous precedent with this investigation that has a lot of people concerned.
A Coinbase customer filed an official motion to block this investigation, even though the company does not want to obstruct the investigation either. Taxation of Bitcoin and other virtual currency in the US is broad and vague at the same time. Moreover, it is unclear what the IRS hopes to obtain from this investigation, as they have not outlined a clear train of thought so far.
But the biggest concern people should have is how the IRS’s computer network is anything but secure. Obtaining all of the information from over 1 million users would open the floodgates for hackers and other criminals trying to steal this data. Additionally, the government agency has been very slow when it comes to addressing computer security breaches. Putting so much information into the hands of people who can’t keep it safe is not the best course of action.
Unfortunately, it appears the Coinbase user’s motion has very little chance of succeeding right now. To be more precise, some IRS summons is challenged successfully through the legal system, although those numbers pale in comparison to the number of motions that are rejected. But even if the motion is rejected, it could help slow down the IRS audit process, which would not be a bad thing either.
That being said, now that the IRS has set their sights on looking into Bitcoin users, they will be in the crosshairs for quite some time to come. It is evident the IRS wants to gain more information about how Bitcoin is used, Whether or not a summons is the best way to go about things, remains up for debate, though.
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