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The IRS is Targeting Bitcoin Transaction Records of Coinbase Users

Last Updated March 4, 2021 4:52 PM
Samburaj Das
Last Updated March 4, 2021 4:52 PM

Transaction records of Coinbase users, specifically bitcoiners, have been targeted by the Internal Revenue Service (IRS), according to a federal case filed in the U.S. District Court in the California Northern District Court.

First revealed by ZeroHedge on a late Thursday night November 17, the civil petition was filed in the federal court in California the same day.

With a “John Doe” summons, a summons issued by the IRS to a third party to provide information on unnamed, unknown taxpayer(s), the filing  reads:

Based upon a review of the Petition and supporting documents, the Court has determined that the “John Doe” Summons to Coinbase, Inc., relates to the investigation of an ascertainable group or class of persons, that there is reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of internal revenue laws…

As a result, Coinbase will be served an IRS summons to facilitate the federal agency’s investigation into possible tax evasion by users of virtual currencies at any time between January 1, 2013, through December 31, 2015. Notably, since Coinbase enabled Ethereum support in July 2016, thatleaves bitcoin users under the purview of the summons and investigation covering the last two years.


A representative for Coinbase confirmed the petition put forth in federal court. Posting  on the relevant Reddit thread, the rep added:

We take user privacy very seriously and will work to protect the privacy of our users in broad information requests. We are taking a very careful look at this petition and the scope of the government’s authority as it relates to this request.


The case will be presided over by District Judge Jacqueline Scott Corley , previously a civil litigator with a focus on federal practice and experience in nearly every kind of federal litigation as a judge.

Clueless on Bitcoin Taxation

The IRS filing comes in the days following a damning review by the Treasury Inspector General who determined that the IRS’ strategy for taxing income related to virtual currencies is lacking in a big way.

The official opined:

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.

An accompanying document  in the lawsuit states virtual currency is treated as property “for federal tax purposes”, in an attempt to bring some clarity. Furthermore, a taxpayer who “receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in US dollars, as of the date that the virtual currency was received.”

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