Digital currency exchange Coinbase has a won an important battle with the Internal Revenue Service, halting the US government’s demands for the transaction history of all of its users.
Despite not having a clear digital currency tax strategy, the IRS sent Coinbase a summons in November 2016 in which it requested the transaction history from 2013-2015 of all of Coinbase’s customers. Known as a “John Doe summons”, this request would have entailed Coinbase sharing sensitive information of half a million customers, many of whom have engaged in only small transactions during that period. Among these users were gamblers who use bitcoin for online wagering and conduct their buys and sells through Coinbase. Many of these bettors may not have paid tax on their bitcoin-related winnings, and as such would be subject to retrospective tax payments and possible fines.
Despite not having a clear digital currency tax strategy, the IRS sent Coinbase a summons in November 2016 in which it requested the transaction history from 2013-2015 of all of Coinbase’s customers. Known as a “John Doe summons”, this request would have entailed Coinbase sharing sensitive information of half a million customers, many of whom have engaged in only small transactions during that period. Among these users were gamblers who use bitcoin for online wagering and conduct their buys and sells through Coinbase. Many of these bettors may not have paid tax on their bitcoin-related winnings, and as such would be subject to retrospective tax payments and possible fines.
These gamblers, along with the remainder of Coinbase’s user base, can now rest easy, however, as the IRS has narrowed the extent of its Coinbase summons. This follows accusations from various stakeholders that it was overstepping its powers. US Congress, Coinbase and Coinbase users – some of whom launched legal action against the IRS – all argued that the government’s demands in the original summons were excessive, and impeded on the privacy of the vast majority of Coinbase users, particularly those who were not conducting the types of transactions required to report them to the IRS.
The result of this pushback was a watered down version of the summons, which stipulates that Coinbase will only have to supply the IRS with details of users that bought, sold or received at least US$20,000 in a single transaction between 2013 and 2015. Additionally, the summons now excludes Coinbase users who bought Bitcoin of any amount but did not sell it during the aforementioned period, while the IRS is no longer demanding certain types of sensitive information such as bank transfer records, correspondence between customers and Coinbase, and other personal information.
That curtailed summons is a big win for Coinbase users who were concerned about their privacy being impeded upon. Moreover, it will provide relief to many US-based online gamblers, particularly the high rollers with a potential tax liability.
The result of this pushback was a watered down version of the summons, which stipulates that Coinbase will only have to supply the IRS with details of users that bought, sold or received at least US$20,000 in a single transaction between 2013 and 2015. Additionally, the summons now excludes Coinbase users who bought Bitcoin of any amount but did not sell it during the aforementioned period, while the IRS is no longer demanding certain types of sensitive information such as bank transfer records, correspondence between customers and Coinbase, and other personal information.
That curtailed summons is a big win for Coinbase users who were concerned about their privacy being impeded upon. Moreover, it will provide relief to many US-based online gamblers, particularly the high rollers with a potential tax liability.