The Internal Revenue Service made demands to Coinbase to turn over information on every single one of its US users in the May 17 letter.
Senior Republicans were quick to point out that the IRS might very well be exceeding its authority.
The “millions of pages” requested seem out of proportion considering that most users traded less than $10,000 worth of cryptocurrency in the requested period. Coinbase, which frequently denies access to users who fail KYC and AML standards, was quick to defend its customers.
DOJ trial attorney Amy Matchison points out that the IRS has been in talks with Coinbase to narrow its request to only “unreported income” items. The audits will be limited, but not dropped completely.
The “narrowed summons” released July 7 has made the following notable changes:
- Eliminates request for payment information and security settings.
- Eliminates request for power of attorney letters and corporate minutes tied to third parties
- Limits request for correspondence between Coinbase and users to portions that cover account opening/closing and transactions.
Furthermore, the IRS is now seeking to probe users who own or trade $20,000.
Crypto and taxes
The fact that many traders in the cryptocurrency markets are not clear on how to file their earnings might be the root of the problem. Only 802 individuals filled the 8949 form and relating Bitcoin profits.
Coinbase did recently provide some information that might be useful to users regarding their questions, bringing to light that it might be more of a question of how to correctly report your profits rather than avoiding them.
Cryptocurrency profits and taxes vary from country to country and have to have been addressed efficiently. With the growth spurred in the past few years, this might be the next target to make adoption, use and regulation [on profits] easier.
Coinbase pushes on
Amid the summons, with Berns Weiss defending users, Coinbase is still growing rapidly and seeking to raise substantial funding to feed the growth.
In January CEO Brian Armstrong said the legal battle could cost his company up to $1 mln.
Despite the recent slowdown in market growth – 2017 is still lining up to be one of the most bullish years cryptocurrencies have ever seen.