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.
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.