The IRS just ordered Coinbase to release data on users trading more than $20,000. Edgy Labs brings you up to speed.
Most cryptocurrencies (including Bitcoin), have existed as a way to pay for items online in an untraceable way. But it seems that the U.S. tax authority is finally starting to understand the power of digital currency and the impact of events like minergate.
After noticing that the number of tax returns claiming gains from virtual currency didn’t line up with the emerging popularity of digital currencies like bitcoin as an investment vehicle, the IRS asked Coinbase to hand over a broad swath of information on its users.
This Bitcoin news likely prompted the most recent fork in the cryptocurrency that created Bitcoin Gold.
New Federal Ruling in Favor of the IRS
On Wednesday, a federal judge in San Francisco ruled that Coinbase must supply the IRS with identifying information on users who had more than $20,000 in annual transactions on its platform between 2013 and 2015.
While cryptocurrency users who value the relative decentralization and privacy afforded by digital currencies won’t be happy, Coinbase’s success in limiting the government’s initial request for information on all Coinbase users is something the company is considering a “partial victory.”
“Coinbase itself admits that the Narrowed Summons requests information regarding 8.9 million Coinbase transactions and 14,355 Coinbase account holders. That only 800 to 900 taxpayers reported gains related to bitcoin in each of the relevant years and that more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin in a given year suggests that many Coinbase users may not be reporting their bitcoin gains,” the court documents read.
What Kind of Information is Being Handed Over?
However, as of now, the IRS can only request from Coinbase a taxpayer’s ID number, name, date of birth, address, transaction logs and account statements, since the federal judge ruled that documents including “complete user profiles” are “not necessary.” In fact, these personal data requests will only apply to accounts that have bought, sold, sent or received more than $20,000 in any of those types of transactions between 2013 and 2015.
As the court documents specify, the narrowed IRS request “applies to far fewer, but still more than 10,000, Coinbase account holders.”