Coinbase investors knew this day was coming. The top US cryptocurrency exchange for bitcoin, Bitcoin Cash, Ethereum and Litecoin on Feb. 23 notified the 13,000 affected investors by email, informing them the other shoe had dropped. Coinbase will comply with a judge’s ruling in a California federal court to share customer data of 13,000 of its users with the Internal Revenue Service’s (IRS). The IRS was most concerned with accounts with at least $20,000 “in any one transaction type,” as per the court ruling.
While the number of customers affected may sound high, it’s fewer than the initial amount that the tax agency requested in December 2016 for 500,000 customer records. Coinbase deems it a partial win, reminding investors it advocated on their behalf after taking the matter to the US courts.
Among the details that the IRS asked for were “taxpayer ID, name, birth date, address, and historical transaction records for certain higher-transacting customers during the 2013-2015 period,” as per a notification on Coinbase’s website.
Coinbase investors took to Twitter to reveal their fate.
Received notice from Coinbase today, that my account is one of the 13,000 that they will have to turn over to the IRS under the court order.
Not surprised, I knew I would be in that group. In case you were wondering, I've filed & paid taxes for my bitcoin income, gains/losses.
— Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) February 23, 2018
Some managed to find the humor in the situation.
Good news: the IRS wanted info on 500,000 customers but the court says we only have to turn over records for 13,000.
Bad news: Baby, it's you. pic.twitter.com/beiEby6Xa4
— Ryan Godfrey (@rgodfrey) February 23, 2018
Although these Coinbase investors have been reporting their gains and losses with the tax agency already, others may not be as prepared. Recent reports suggest that only a small percentage of Americans have been reporting their cryptocurrency transactions to the IRS, based on CreditKarma data so far.
Year-to-date, a quarter-million Americans have filed their federal taxes via CreditKarma. Of that amount, fewer than 100 have disclosed cryptocurrency activity. Meanwhile, more than half of 2,000 American taxpayers that participated in a recent CreditKarma survey said they experienced crypto-fueled gains. Taxpayers have until the April 15 deadline to file.
Additionally, the same cohort has yet to report any cryptocurrency gains to Uncle Sam ever, despite the fact that many investors seemed to understand that they owe taxes on the gains.
Coinbase boasted more than 13.3 million platform users as of October, according to data cited in CNBC. It’s unclear, however, the percentage of these users that are based in the United States.
Meanwhile, the crypto exchange’s user base surpassed the number of accounts at traditional stock brokerage Charles Schwab, whose number of users stood at 10.6 million as of Q4 2017. Coinbase in the fall added hundreds of thousands of accounts in as little as one week’s time. Meanwhile, the crypto exchange’s members have ballooned from less than 5 million in 2016.
Cryptocurrencies are taxed as property in the United States. As a result, crypto profits must be reported as capital gains while losses can be reported to offset gains.
Coinbase said it would turn over the customer records to the IRS “within 21 days.”
Featured image from Shutterstock.