The Internal Revenue Service is looking for information on bitcoin users from Coinbase, one of the largest bitcoin exchanges in the U.S., as part of its efforts to uncover possible tax evasion.
The IRS sent a broad request known as a John Doe summons to Coinbase last week seeking information on all of the San Francisco-based service’s users, according to The New York Times. The request follows on the heels of a report earlier this month from the Treasury Inspector General for Tax Administration that found the IRS should be doing more to ensure taxpayers aren’t using virtual currencies like bitcoin to avoid taxes (see IRS Warned to Safeguard Against Illegal Use of Virtual Currency).
The IRS did not immediately respond to a request for comment. However, the IRS filed an affidavit with the court last Thursday explaining its request, according to the technology website Ars Technica.
“The information and experience of the IRS suggests that many unknown US taxpayers engage in virtual currency transactions or structures... Because the IRS does not know the identity of the individuals within the ‘John Doe’ class, the IRS cannot yet examine the income tax returns filed by those US taxpayers to determine whether they have properly reported any income attributable to virtual currencies.”
The company plans to challenge the IRS’s request for information on its customers. Coinbase spokesman David Farmer directed Accounting Today to a comment posted on its blog last Friday about the IRS request.
“Our customers may be aware that the U.S. government filed a civil petition yesterday in federal court seeking disclosure of all Coinbase U.S. customers' records over a three year period. The government has not alleged any wrongdoing on the part of Coinbase and its petition is predicated on sweeping statements that taxpayers may use virtual currency to evade taxes. Although Coinbase's general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government's request. Our customers’ privacy rights are important to us and our legal team is in the process of examining the government's petition. In its current form, we will oppose the government’s petition in court. We will continue to keep our customers informed on developments in this matter.”
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