The United States’ Internal Revenue Service, which is responsible for everything tax-related in the country, recently announced that it would be scaling back audits of Coinbase accounts. The IRS has reportedly been looking into over 1 million different accounts, but said it would scale back requests for passwords and security settings for the accounts in question.
The IRS made this announcement last week, shortly after news broke that anonymous buyers were looking for representation and to intervene in the case. Being that Bitcoin is not recognized as legal tender, it may be a bit confusing as to how the IRS is able to come after Coinbase account holders. The reason for this is that that money transacted in Coinbase wallets most often involves USD, and if the USD is being exchanged, the IRS will become involved if losses and/or profits are not being reported.
Not Reporting on Tax Documents
The IRS probe, as it were, began last year when the tax agency reached out to Coinbase demanding that they show them customer account activity from 2013-2015. This time frame was chosen because it was a 2-year period during which Bitcoin’s price absolutely skyrocketed. Despite this, less than 1,000 total people declared gains/losses related to their Bitcoin dealings.
Coinbase has not commented on the Internal Revenue Service’s decision to scale back their probe into Coinbase accounts at this point.
Right now, the legal battle involving the IRS doesn’t involve Coinbase at all. Instead, it is anonymous account holders who are coming after the IRS for their probe. Basically, these account holders are reaching out to the judge involved in the probe, Berns Weiss, and are attempting to challenge the IRS summons relating to Coinbase accounts.
Coinbase Not Sitting Down
Even though Coinbase, as an organization, is not thus far legally involved in fighting the IRS probe, a lawyer representing them said that that is going to change in the near future.
According to Fortune, when the IRS initiated the probe over a year ago, the feeling amongst legal experts was that they were demanding every user’s account information in hopes of using that as a bargaining chip. In the end, these experts were certain that the IRS was only after certain accounts.
Despite their announcement that they would not be seeking passwords nor account settings, the IRS has not really commented on how they will be scaling back their probe. In other words, it seems as though that is all talk and not really based in reality. The IRS probe is going forward at full steam and the feeling amongst Coinbase account holders is a nervy one. There are certain to be plenty of further developments from this probe—especially when Coinbase becomes officially involved from a legal standpoint—but for now all we can do is speculate.