Coinbase, the San Francisco-headquartered bitcoin exchange on Friday, gave an update to it’s users about the Internal revenue service taxation situation.
Last year, in the fall of 2016, Coinbase was summoned to provide identities and records of U.S. users.
The company gave an update stating, that they appeared in Federal Court to continue fighting for its customer’s privacy rights. The IRS started getting serious about this matter last year and requested that coinbase hand over the requested information as soon as possible. The IRS requested the information for the years (2013 –2015). The courts never pointed the finger at coinbase.
Coinbase is stating that they are fighting for privacy rights of the users and have already made good progress. Before, the government was asking for the records of more than 450,000 users/account holders. As Coinbase makes it’s progress in It’s objections, the government has receded and has asked for about 14,000 accounts. Coinbase objects to the summons and the requests by the government to access these records and has issued a statement:
“We were proud to appear in court today, together with support from industry colleagues, to continue to fight against what we believe to be government overreach. In the future, we hope to work with the IRS to establish a reasonable tax reporting method that makes sense for virtual currency service providers and consumers alike.”
Yet, beware Coinbase users, these proceedings don’t bode well for you if you haven’t paid taxes on your bitcoin earnings. Coinbase may have won the battle but they might not win the war. When it comes to taxes, the piper typically must be paid. The courts may eventually force the company to give over the records for many users thus causing great issues for these users.
The IRS is wondering where all their potential revenues are. They are looking at the price of BTC rise and looking at all the potential USD’s that are being captured and wondering where their precious piece of the cake is. The people from the IRS then looked at the tax returns and have only seen a couple of people report their earnings. They put two and two together and scratched their heads. Two and two doesn’t seem to be adding up. They are now out on a mission to make sure it adds up.
The way that the current regulations are setup state that btc holdings are taxed similar to property, whenever there is a gain on the capital, taxes are applied, these taxes are triggered when the sale is made. The amount of taxes is based on the final sale of the digital coin. Meaning that, if you were a law abiding citizen in the great united states and are flying around in the digital world of bits and bytes making cryptocurrency transactions, you would be legally required to diligently keep those meticulous records where you made many gains and hand it over like the great American that you really are. You are required to show the profits made even if they would only buy a case shoe shine to shine your shoes. A gain is a gain to the IRS, they don’t discriminate, they simply collect.
In this case after the negotiations with Coinbase they are seeking the heavyhitters, those who have had transactions of $20,000 or more in on year in the period they requested.
Bloomberg states that it is very likely that the courts will reel them in.