If you happen to be one of the 14,000 Coinbase users who’ve received over $20,000 through its accounts, the Internal Revenue Service (IRS) will soon have access to those identifying records.
After more than a year, when the case was initially filed, which attempted to prevent the IRS from gaining access to the transaction records of Coinbase users, a California federal court has ordered that the digital currency exchange turn over the accounts of some of its users.
As CCN.com has extensively reported on, the IRS maintained the ongoing battle with Coinbase in a bid to force it to hand over customer financial records to the tax-collecting agency. Back in 2016, it was reported that the exchange was being targeted by the IRS, with a federal judge approving a summons requiring Coinbase to disclose transaction records of bitcoiners between January 1, 2013 and December 31, 2015.
Initially, the IRS requested the records of virtually all U.S. customers between those time frames, which Coinbase estimates includes over 500,000 customers.
However, in a partial victory for the digital currency exchange, the IRS significantly reduced this figure to 14,355 customers. In a blog post discussing the court’s verdict, David Farmer, director of communications at Coinbase, said:
Thanks to Coinbase’s efforts, more than 480,000 customers’ records were preserved from disclosure. This is a 97% reduction in the number of customers impacted by this summons.
According to the court order, for each of the more than 14,000 accounts, Coinbase is to provide the IRS with the user’s name, birth date, address, and taxpayer ID. Additionally, the tax agency requests the records of all account activity and any associated account statements.
Although we are disappointed not to be able to entirely defeat the summons, we are proud to fight for our customers and in the result we were able to achieve as a small company against a large government agency.
According to the verdict, the order was justified based on the discrepancy that there are more Coinbase users trading bitcoin than reporting gains on their tax returns. In March, it was reported by the IRS that fewer than 1,000 U.S. citizens report their bitcoin earnings each year. At the time, an investigation by the agency found that in 2013, 807 people reported a transaction on Form 8949; in 2014 that figure was 893; and in 2015, that fell to 802.
While the partial victory is not the full victory that Coinbase were hoping for, it brings an end to a lengthy battle that has preserved the majority of the exchange’s user base.
In the future we hope to work with the IRS to establish a reasonable tax reporting method that makes sense for virtual currency service providers and consumers alike.
Featured image from Shutterstock.
Last modified: May 20, 2020 9:18 PM UTC