IRS Attempts to Investigate Coinbase Users for Tax Fraud
The Internal Revenue Service (IRS) is in the midst of a lawsuit against cryptocurrency provider Coinbase. The agency is attempting to gain information about those who use Coinbase, claiming that there is a high likelihood that these users are guilty of various tax crimes.
What is the basis for these allegations? The agency supports these allegations by pointing to the numbers. According to the IRS, they simple do not add up. As noted in a publication by Coindesk, a source that focuses on news relating to digital currency and also a part owner of Coinbase, the federal agency requested information about Coinbase users for 2013, 2014 and 2015.
During this period, 500,000 people used virtual currency through Coinbase. Yet only 807, 893 and 802 users respectively reported gains or losses to the IRS for those years.
What is the issue? The IRS requested Coinbase provide information about users so the agency could look into whether or not these users are complying with internal revenue laws. Coinbase refused to comply with this request and is opposing enforcement efforts through the courts.
What will happen? The IRS responded to the refusal with a petition to the court to enforce the summons. This petition was delivered to the court September 1, 2017. If the courts ultimately force Coinbase to comply, various tax issues could be present. In addition to failing to report gains and losses to the IRS, foreign tax issues could also be present. In fact, it appears some banks even charge “International Transaction Fees” for the purchase of digital currency when the purchase is completed with a debit card.
What should digital currency users do? If you are concerned that your transactions are not in compliance with tax law, it is wise to seek legal counsel. An experienced attorney can review your situation and provide guidance, including tips on how to come into compliance with the least possible penalties.