ATTENTION COINBASE CUSTOMERS: Contact Us if You’ve Received an IRS Summons

One of the attractive features of cryptocurrency has been its anonymity and privacy. While no doubt many owners of cryptocurrency have declared it as income on their income tax returns and paid the necessary capital gains or other taxes, the IRS is still very concerned that there are those who have not. Recently, however, the IRS was able to make a giant leap forward in its quest to uncover the people behind the cryptocurrency transactions.

In November 2016, the IRS filed a request to serve summonses on all of the private and anonymous users of Coinbase (a cryptocurrency exchange), with the district court out of the Northern District of California. Specifically, the IRS requested that the court allow it to investigate bitcoin transfer transactions from 2013 to 2015 because it claimed that it was finding patterns of underreporting and noncompliance, but did not have enough information to make a final determination. Indeed, the IRS in their filing cited to cryptocurrency buyers who “have openly acknowledged that they consider using bitcoin in order to avoid tax reporting requirements.”

Of course, to “consider using” is a far cry from actually doing. Perhaps this is why the court ultimately granted a more narrow review to the IRS even though it had originally sought a broad swath of information about these transactions, including third party information. Coinbase naturally argued that the IRS was on nothing more than a glorified fishing expedition hoping that by casting a large enough net, they would catch something. However, the court disagreed and found that the IRS was seeking information about tax compliance, not “research.”  

The court did specifically deny “at this stage” the IRS’s request for information including copies of passport and driver’s licenses, public keys, and correspondence between Coinbase and the user. This of course means that this information may still become relevant—and discoverable— later on.

For now, Coinbase has been ordered to produce to the IRS the following information for each customer:

  • Taxpayer ID,
  • Name,
  • Date of birth,
  • Address,
  • Account activity records including transaction logs, and
  • Account statements

However, only those customers with a transaction of at least $20,000 in any of the years from 2013 to 2015 are currently covered under the order. The total number of customers affected is estimated to be 13,000.

If you are a Coinbase customer and have received an IRS summons, one of the first things you should do is contact an attorney who is familiar with and knowledgeable about the tax laws and cryptocurrency. You have rights and those rights can and should be protected. Even if you have not yet received a summons, it is still a good idea to get strong legal counsel on your side. The attorneys at Weisberg Kainen Mark are ready and willing to help you in this upcoming fight. Contact us today to get started.

Written by Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL is a Miami-based law firm focused on providing comprehensive legal support to individuals and corporate entities caught up in tax controversies or charged with a criminal act. As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.