Coinbase is a Bitcoin exchange that seems equally loved and hated by community members. The platform has also caught the attention of the IRS, who have requested transactions records for all US users over the past two years. This is not good news for US-based Coinbase users, as they may get scrutinised by the IRS over the next few months.
What Does The IRS Want With Coinbase Records?
Based on a John Doe summons issued to Coinbase, it has become apparent the IRS wants to obtain accurate information from the Bitcoin exchange. Such a summons is only used if the IRS feels one or more individuals using a particular service may have failed to comply with provisions. Or to be more precise, some people may have used Coinbase to escape paying taxes.
More particularly, the IRS aims to obtain information of all US Coinbase customers active on the platform between January 1, 2013, and December 31, 2015. That is a rather extensive period, which raises a lot of privacy concerns from Coinbase users. Then again, this is another excellent example of how centralised exchanges can be used to bring blows to the Bitcoin ecosystem over time, as they collect and share information on request.
It has become apparent the IRS needs to step up their regulation to accommodate for Bitcoin and other cryptocurrencies. Up until this point, the current framework does not cover cryptocurrency. It is possible this investigation is part of the IRS’ attempt to revamp their Bitcoin taxation strategy, although that had not been officially confirmed.
The IRS Inspector General stated the following:
“The IRS needs to ensure that it develops a strategic plan that includes management oversight as well as adequate internal controls for its virtual currency programs. Until a comprehensive virtual currency strategy is developed, the IRS is open to the risk that undetected noncompliance of virtual currency taxable transactions will result in an increase to the Tax Gap.”
Fulfilling tax obligations while dealing with Bitcoin transactions it not straightforward by any means. This Coinbase investigation may pave the way for more John Doe summons of this nature, which may spell positive or negative for Bitcoin as a whole. Magistrate Judge Jacqueline Scott Corley will preside over this case. Further information is expected to be revealed in the coming weeks.
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