The U.S. District Court for the Northern District of California recently ordered Coinbase Inc., the world’s largest cryptocurrency exchange and storage platform, to provide information to the Internal Revenue Service (IRS) about accountholders who have entered into transactions valued at $20,000 or more between 2013 and 2015. Cryptocurrency or virtual currency, such as bitcoin, has come under significant scrutiny by the IRS lately.
Digital currency can be traded for traditional currency and is considered property for tax purposes. The IRS served its “John Doe” administrative summons on Coinbase in order to identify users who may have underreported their virtual currency gains.
Enforcement of the summons means little for most Coinbase users: of the approximately 5.9 million customers it serves, only about 14,300 account holders fall within the scope of the summons as narrowed through litigation. However, many of the Coinbase users whose information is subject to the summons may have compliance issues — the IRS reports that only 800 to 900 taxpayers reported digital currency transactions as required during the years at issue.
If you bought, sold, sent, or received cryptocurrency between 2013 and 2015, contact one of our attorneys today to learn how to bring your taxes into compliance.
To read the full court order in the Coinbase summons, click here.