Just In: IRS Will Receive Personally Identifiable Data of Coinbase Users
Uh oh. Coinbase has just been ordered to meet the demands of the Internal Revenue Service. A year after the case was initially filed, a California federal court has ordered the popular digital currency exchange to hand over identifying records of its users.
Everyone who may have transacted (all types of transactions included) more than $20,000 through their accounts in a single year will have their data sent over to the IRS. The San Francisco-based firm estimates that nearly 15,000 of its users (over 9 million transactions) meet these requirements set by the government.
Order covers Coinbase transactions between 2013 and 2015
Today's order covers transactions between 2013 and 2015 and only affects Bitcoin. The case was filed last year when the IRS demanded that Coinbase provides detailed personal information of more than a million of its customer accounts. The agency had argued that only 802 US citizens reported cryptocurrency holdings in their taxes in 2015 when millions were transacting in the digital currencies. The number of users has now been limited to only those who have bought, sold, sent, or received more than $20,000 in the digital currency.
Coinbase is ORDERED to produce the following documents for accounts with at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013 to 2015 period:
(1) the taxpayer ID number,
(3) birth date,
(4) records of account activity including transaction logs or other records identifying the date, amount, and type of transaction (purchase/sale/exchange), the post transaction balance, and the names of counterparties to the transaction, and
(5) all periodic statements of account or invoices (or the equivalent).
The company had called the agency's demands an illegal imposition. However, it has agreed to comply with the court order and won't likely be appealing. "Although we are disappointed not to be able to entirely defeat the summons, we are proud to fight for our customers and in the result we were able to achieve as a small company against a large government agency,” the company said in a blog post.
First, the government vastly narrowed the scope of its summons. The government’s own lawyers noted at the hearing that the IRS is not accustomed to having to fight for records in this context, and most companies just turn records over without going to court. Thanks to Coinbase’s efforts, more than 480,000 customers’ records were preserved from disclosure. This is a 97% reduction in the number of customers impacted by this summons.
IRS had demanded broad swaths of user data
For those users who meet these requirements, Coinbase will have to hand over their name, birth date, address, taxpayer ID, and records of all account activity and any associated account statements. This means that the agency will receive a detailed record of all the transactions done through Coinbase.
IRS had initially demanded even more data and of all the Coinbase users, including their communications and passport information - the court has rejected these demands. "At oral argument the Government explained that it included such broad swaths of records in its summons so that it will not need to return to court to ask for them if and when needed," the order reads (via The Verge). "The Court is unpersuaded."
While the ruling only affects transactions between those three years and is limited to Bitcoin, based on this precedent, the government can create further tax complications covering more currencies and other exchanges. Coinbase has promised to notify impacted users in advance of any disclosure made to the IRS, however, the ruling is going to raise some concerns within the digital currency community.
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