Judge Approves IRS Tax Information Request to Coinbase

On November 20, the American IRS (Internal Revenue Service) submitted a request to Bitcoin startup, Coinbase. The document demanded detailed financial and personal information on all of the platform’s users. Now, the judge assigned to the case has ruled in favor of the government agency.

The Internal Revenue Service has a judge’s green-light to serve Coinbase, one of the biggest Bitcoin startups, with a summons for detailed information about its users. Judge Jacqueline Scott Corley ruled on November 30th:

Based upon a review of the Petition and supporting documents, the Court has determined that the “John Doe” summons to Coinbase, Inc. relates to the investigation of an ascertainable group of people or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed  to comply with any provisions of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony (and the identities of the persons with respect to whose liability the summons is issued) are not readily available from other sources.

Initially, the IRS is seeking information on American citizens who, at any time during the period January 1, 2013, through December 31, 2015, conducted transactions in a “convertible virtual currency”, the definition used by the IRS to label cryptocurrencies.

The tax agency, along with the government, ruled on 2014, that “convertible virtual currency” had tax consequences. IRS stated that it had suspicions over U.S Taxpayers who haven’t complied with tax laws. For the IRS, Bitcoin and other cryptocurrencies are prone to serve as a mechanism to avoid taxes. The agency said:

The I.R.S. not only has suspicion that the John Doe class includes U.S. taxpayers who are not complying with the law, but it knows that the class in the past included such violators, and very likely includes others.

Coinbase is determined to fight the ruling. After the IRS made public the request for its user’s information, the company is concerned with the agency’s summons. The company said:

We are aware of, and expected, the court’s ex parte order today. We look forward to opposing the DOJ’s request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our US customers’ legitimate privacy rights in the face of the government’s sweeping request.

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