Due to the general animosity toward paying taxes, people sometimes try to hide, lie about, or simply not report all of their income and/or property to the IRS. But, those who thought they could keep their cryptocurrency information from the IRS may be out of luck. A popular cryptocurrency wallet called Coinbase has agreed to provide the IRS with account information on 13,000 users.
What Led to the IRS Request?
The IRS considers cryptocurrencies to be property subject to taxation, and believes that millions of Americans are not reporting their cryptocurrency in their tax returns. And, the IRS might be right as fewer than 1,000 people reported that they have cryptocurrency despite the fact that Coinbase says it has over 10 million users. For its part, Coinbase didn't want to provide the information to the IRS. In fact, Coinbase fought the IRS in court to resist the request, and was able to reduce the scope of the summons.
Coinbase said that its intention in fighting the request was to "protect its customers, and the industry as a whole, from unwarranted intrusions from the government." But, in the end, the court ordered Coinbase to turn over user information to the IRS. As a result of the court order, Coinbase will provide account information, including transaction records and taxpayer IDs, for the 13,000 users. The request of the IRS focuses on Coinbase users who bought or sold $20,000 worth of cryptocurrency between 2013 and 2015.
If you have questions about what property and income is subject to taxes, it's a good idea to contact a tax attorney. After all, failure to report all of your earning and property when filing taxes could result in an audit or even charges of tax evasion or tax fraud.
- Find a Tax Attorney Near You (FindLaw's Lawyer Directory)
- Tax Law (FindLaw's Learn About the Law)
- Should You Add Bitcoin to Your Estate Plan? (FindLaw's Law and Daily Life)
- 3 Legal Tips on How to Handle Digital Assets in a Prenuptial Agreement (FindLaw's Law and Daily Life)