Bitcoin Traders Unmasked: Coinbase to Concede 13,000 Customer Records to the IRS
In what has been an ongoing legal tussle since 2016, Coinbase is preparing to hand over the records of 13,000 of its customers to the United States Internal Revenue Service (IRS, in compliance with a court order from a California Federal Court.
The final figure of 13,000 is a significant reduction from the initial 500,000 customer records that was demanded by the IRS at the outset of the inquiry. In many ways, it seems like a partial victory for the Coinbase platform especially within the context of their desire to advocate for their customers.
A Little Bit of History
In 2016, the IRS issued a summons to Coinbase, directing the cryptocurrency exchange platform to reveal customer information. The IRS wanted information on all Coinbase customers who had bought bitcoin in the period between 2013 and 2015. The rationale given for the summons was based on alleged cases of tax evasion that had been linked to Coinbase customers. Coinbase refused to honor the summons, and the case went to court.
By January 2017, Coinbase was hoping to reach a “reasonable agreement” with the IRS, one that would enable them to comply with regulatory authorities without compromising on their mandate to protect sensitive customer data. The basis of Coinbase’s position was predicated on the belief that the IRS was wrongly assuming that the majority of its customers were evading taxes. The court ultimately sided with the IRS, and now the platform has to comply with the ruling.
The news while disappointing for some will not come as a surprise as it has been inevitable ever since Coinbase notified its users earlier in February.
In an email to affected customers, the platform informed them that they were going to comply with the court order and hand over the requested records.
The details requested by the IRS include name, date of birth, address, tax details, as well as historical transaction data. This last category of customer data is for a number of customers who made high-value transactions between the period under review.
Cryptocurrency Tax Regulations
Cryptocurrency is classified as a property in the United States. Thus, US property tax laws apply to cryptocurrency transactions in the country. Profits from cryptocurrency trading must be filed as capital gains while losses have to be reported as offset gains. The IRS believes that a great majority of Americans are not declaring their gains from the colossal price increases of digital assets like bitcoin, ether, and litecoin. This comes as the IRS revealed that only 802 Americans submitted tax filings for cryptocurrency gains is 2015.
The handover of identities is the latest in a series of steps by the IRS to combat tax evasion in the cryptocurrency market. Taxpayers in the United States who are involved in cryptocurrency trading have until April 15, 2018, to disclose their capital gains and offset losses to the IRS by filing a form 8949. As for Coinbase, they have stated that within the next 21 days, they will turn over the records to the IRS.