Submitted by Taps Coogan on the 1st of December 2017 to The Sounding Line.
As can be found in the Top News Stories on the left hand side of The Sounding Line, Tech Crunch is reporting that a Federal Judge is ordering one of the largest Bitcoin exchanges in the US, Coinbase, to turn over data on its users to 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. 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. Coinbase pushed back, and now the court has landed on a compromise that the company is calling 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.
Coinbase had apparently refuted the scope of the IRS’s initial request, with the court partially agreeing and narrowing the request:
“today the court narrowed the scope of documents that the IRS can request from Coinbase to taxpayer ID number, name, date of birth, address, transaction logs and account statements, deeming the rest of the documents “not necessary.”
There is a popular misconception that Bitcoin is a totally anonymous medium of exchange. While Bitcoin provides a good degree of anonymity once you possess it, the process of first obtaining Bitcoin typically requires the use of an exchange. These exchanges generally require your credit card and/or bank account information and/or ID. Hence, with the information about users that is known to the exchanges, the IRS can determine who has bought and sold Bitcoin.
What you do with your Bitcoin may be largely anonymous, but whether you have bought (or sold) Bitcoin really is not. Since next to no-one is paying the taxes they owe trading Bitcoin, the IRS is justifiably getting involved. This is really important, not only for people who may have overlooked the tax problem, but because so much of the interest in Bitcoin is now coming from lay-people who really don’t understand what it is and how it works. A whole lot of people getting into trouble with the IRS is not going to be good for the current Bitcoin mania.