A new attempt by the Internal Revenue Service to collect data on a large group of bitcoin users — customers of Coinbase, the most popular cryptocurrency exchange in the United States — threatens that privacy, but the players involved aren’t giving up without a fight.
In November, the IRS, with approval from a federal court, served a subpoena to Coinbase, requesting information on its users from January 1, 2013 to December 31, 2015. The purported reason? To catch individuals using cryptocurrency to evade taxes.
Comparing the amount of information requested in the case to that required for a criminal proceeding, he says, “They want every scrap of email. Every scrap of transaction history. They want to know the devices that accessed your account and how. They want the password that access your account and, as I read it, access to the virtual currency. I don’t know how many people understand that. Once you have private keys, it’s the password that controls your virtual currency, [the money] can be sent out anywhere and never recovered again.”
Taxing the Blockchain
The IRS was actually one of the earliest agencies to consider cryptocurrency policy, perhaps for obvious reasons. In March of 2014, the agency issued an "IRS Virtual Currency Guidance" detailing the tax requirements for cryptocurrencies.
The IRS decided to treat cryptocurrencies as a kind of property, which meant that they enjoyed a lower capital gains tax rate than if they were taxed as a currency. But it also meant that cryptocurrency users would need to keep track of any price movements in between transactions for tax purposes. And what's worse, there would be no "de minimis" tax exemption for very small transactions. So the woman buying her daily cup of coffee with cryptocurrency would have to track price fluctuations as meticulously as the professional financial trader.
Source: http://reason.com/archives/2017/01/24/the-irss-war-on-coinbase
Relevant:
https://www.irs.gov/irb/2014-16_IRB/ar12.html IRS Virtual Currency Guidance
https://medium.com/@barmstrong/coinbase-and-the-irs-c4e2e386e0cf#.wzdckltk3
Response of Coinbase to the IRS
Image: CC0 pixbay
Source: http://www.forbes.com/sites/laurashin/2017/01/24/is-the-irs-justified-in-demanding-information-on-millions-of-bitcoin-users/#5b9d072a69e3