Coinbase Must Give Info To IRS For Transactions Over $20K

On December 2, 2016 we posted IRS Wins Summons Challenge From Virtual Currency Exchanger Coinbase Inc. which discuss that a California federal court authorized a John Doe summons by the IRS to obtain information from virtual currency exchanger Coinbase Inc. so it can investigate whether the company’s customers avoided paying taxes on transactions made through the company.
According to Law360, a California federal judge on November 29, 2017 handed the Internal Revenue Service a partial win in the agency’s bid to seek records from Coinbase Inc., saying the virtual currency exchange must hand over information on accounts with transactions of greater than $20,000.

In an order, U.S. Magistrate Judge Jacqueline Scott Corley said Coinbase must provide:

1. The taxpayer ID,
2. Name,
3. Date of birth and
4. Address for the accounts.,

but not:

1. Copies of passports,
2. Driver’s licenses,
3. Wallet addresses and
4. Public keys for accounts

because they were not relevant for investigating tax delinquency among account holders.

“The summons as narrowed by the court serves the IRS’ Legitimate Purpose of Investigating Coinbase Account Holders Who may not have Paid Federal Taxes

on their Virtual Currency Profits,” Judge Corley said.

The opinion said the government met its minimal burden to show the narrowed summons serves a legitimate purpose to investigate “the reporting gap between the number of virtual currency users Coinbase claims to have had during the summons period” and “U.S. bitcoin users reporting gains or losses to the IRS during the summoned years.” But other requests were not relevant to achieve the government’s purpose, Judge Corley said.

As such, the judge denied the petition to enforce documents seeking know-your-customer diligence; agreements or instructions granting a third-party access, control or transaction approval authority; and certain correspondence between Coinbase and the user or any third party with access to the account.

Jim Harper, vice president of the Competitive Enterprise Institute, which supported Coinbase, said Judge Corley was kind to the IRS in finding the summons was not an abuse of process. Harper said Coinbase announced it will give affected individuals notice before their information is shared, which will give users the right to object.

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