Today in Northern California District Court, a federal judge approved a summons requiring the Bitcoin wallet service Coinbase to hand over records of all transactions that took place from 2013 to 2015, as part of a larger investigation into possible tax fraud by Coinbase users.
“The taxpayers being investigated have not been or may not be complying with U.S. internal revenue laws requiring the reporting of taxable income from virtual-currency transactions,” the IRS wrote in its request. As a result, the agents argued, anyone conducting a virtual-currency transaction during that period could be reasonably suspected of tax fraud, and requested transaction records on that basis.
While money made through Bitcoin trading is taxable as income, reporting of that income is often inconsistent, so it is likely the records contain at least some instances of tax evasion. While transactions between wallets are visible in Bitcoin’s public ledger, only Coinbase has the necessary data to identify the owner of each of its wallets, a necessary step in assessing their tax status.
Still, Coinbase has previously expressed concerns about the broad scope of the request, and in a statement to The Verge, Coinbase said it will oppose the summons in court. “We are aware of, and expected, the Court’s ex parte order today,” a representative said. “We look forward to opposing the DOJ’s request in court after Coinbase is served with a subpoena.”
The order has also drawn significant criticism from many in the Bitcoin community. “Americans would be shocked if the IRS asked a financial institution in good regulatory standing to turn over the names, addresses and shopping histories of millions of customers just because the IRS thought there might be some tax cheats among them,” Coin Center’s Jerry Brito wrote in an editorial earlier this week.
Article Source theverge.com