USA: Coinbase is forced to report tax data to IRS
Tax authorities want to know everything
Decentralization does not mean that it would be guaranteed for any crypto investor to remain invisible for the U.S. Internal Revenue Service (IRS). In fact, Uncle Sam expects his share of the cash sales made from digital currency within the calendar year.
According to Coinbase, the company received a summons from the IRS in December 2016 to produce records regarding 500,000 customers. Coinbase took the case to court and fought the IRS. They reached a compromise: Limited categories of information are to be reported. As a result of the information limitation, only 13,000 customers were involved. But now the case has become more serious: Coinbase must provide the IRS with the following: taxpayer IDs, names, birth dates, and addresses. For certain higher-transacting customers, even historical transaction records from January 1, 2013, to December 31, 2015.
Coinbase commented: “This may be relevant to the tax returns that you have filed for the 2013, 2014, and 2015 calendar years.”
Originally, the IRS wanted much more than what the compromise forces Coinbase now to produce. The IRS wanted to collect
- Complete user profiles
- Know-your-customer due diligence
- Documents regarding third-party access
- Transaction logs
- Records of payments processed
- Correspondence between Coinbase and Coinbase users
- Account or invoice statements
- Records of payments
It took more than half a year to reach a compromise. Coinbase finally agreed to produce the following data:
- Account/wallet/vault registration records
- Records of Know-Your-Customer diligence
- Agreements or instructions granting a third-party access, control, or transaction approval authority
- All records of account/wallet/vault activity.
Altogether only 800 to 900 Americans reported profits from crypto-currency transaction, when they electronically filed taxes in 2013, 2014, and 2015. The IRS came along with its request to Coinbase because they believe that, as a result of the growth of the crypto-currency market, there should be additional reported gains. Coinbase will submit the required information to the IRS within 21 days.
So it would be childish to think that the tax authorities around the world will do nothing about hundreds of millions of dollars in crypto profit tax that has not been paid. The question is how far they can go, what they can do to get taxpayers to pay their taxes. There are two kinds of people among those who haven’t paid these due and overdue taxes: the ones who think they can get away with unreported profits, and those who live in countries where even tax authorities do not really know what to report and how, when it comes to crypto-currencies. It seems it’s only a question of time and tax authorities will catch up with the new world.