Approved.
That was the ruling handed down by a Northern California District Court judge, allowing the Internal Revenue Service (IRS) to require bitcoin wallet service Coinbase to submit records of all transactions that took place from 2013 to 2015. The summons was part of an investigation into possible tax fraud committed by U.S. residents who engaged in business with or through the California-based virtual currency exchange.
“The taxpayers being investigated have not been or may not be complying with U.S. internal revenue laws requiring the reporting of taxable income from virtual currency transactions,” the IRS wrote in its request.
The Department of Justice made the request for a “John Doe” summon, which essentially identifies a person or ascertainable group or class by their activities, several weeks ago on behalf of the IRS.
“As the use of virtual currencies has grown exponentially, some have raised questions about tax compliance,” said Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division. “Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that whatever form of currency they use—bitcoin or traditional dollars and cents—we will work to ensure that they are fully reporting their income and paying their fair share of taxes.”
Recently, the IRS has been called to task by the Treasury Inspector General for Tax Administration (TIGTA) over its lax monitoring of digital currency transactions in the country. According to TIGTA, the agency isn’t doing enough to address income streams produced via cryptocurrency, particularly bitcoin, which creates a risk that taxable sales involving digital currencies may go undetected.
The suit doesn’t suspect Coinbase of engaging in any wrongdoing in connection with its virtual currency exchange business. The John Do summons will be used to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown, the court said. Specifically, these John Doe summons directs Coinbase to produce records identifying U.S. taxpayers who have used its services, along with other documents relating to their virtual currency transactions.
Current bitcoin price and transaction volume
Popular digital currency is starting December on a high note, trading at $748.03 early Thursday morning with a trade volume of $41.93 million.
