Court Orders Coinbase to Turn Over User Info to IRS
A federal court in the Northern District of California has ordered Bitcoin exchange Coinbase to surrender customers’ records on online transactions in cryptocurrency (that occurred in 2014 to 2015) to the Internal Revenue Service as part of an ongoing tax-evasion investigation.
IRS officials suspect Bitcoin are being used for tax-evasion purposes in the United States although they have no solid evidence investors and other customers being involved in such activity.
The Department of Justice had made the request earlier this month on behalf of the tax agency since a “John Doe” summons — which permits the IRS to gather information pertaining a group of taxpayers, even when the agency has no knowledge of their identities — can only be served by the IRS upon the approval of a federal court.
According to the IRS official request, the taxpayers under probe have not been or may not be “complying with the laws” of United States internal revenue mandating the reporting of taxable income from electronic money transactions.
During middle of November this year, when the DOJ filed a suit to issue the John Doe summons, the agency disclose an IRS agent identified 3 cases of virtual currencies — there are over a thousand, with Bitcoin by far being the most talked about — being utilized to in tax-evasion transactions.
IRS Commissioner John Koskinen stressed that online transactions involving electronic money are subject to taxes, adding that the John Doe summons is a move aimed at helping the IRS ensure those involved in the emerging economy trade are following tax laws.
Coinbase started operations in 2012 in San Francisco, California as an online wallet where clients purchase, sell and store their digital money. Bitcoin, introduced in 2009, is a traded electronic tender maintained by a vast network of computers and is not supported by a government or agency while also encrypting the identity of cryptocurrency owners.
Meanwhile, the court order has drawn wide criticisms from a large number of bitcoin entrepreneurs. In his editorial this week, Jerry Breto of Coin Center wrote: “Americans would be shocked if the IRS demanded for a financial institution in good standing to turn over the identities and transaction histories of millions of clients just because the IRS suspect these people are trying to evade taxes.