Bitcoin Forum

A closely-watched fight between the Internal Revenue Service and a popular bitcoin exchange took a new twist last week, as senior Republicans in Congress sent a sharply-worded letter that suggests the tax agency is overstepping its powers.

The letter concerns an IRS investigation into possible tax evasion by customers who use Coinbase, a San Francisco-based company that many people use to buy digital currencies. As part of the investigation, which began last year, officials demanded that Coinbase turn over information for every one of its accounts.

Coinbase and its customers are currently in court trying to block the demand, saying it's too broad, and now the letter from the Republicans is likely to give them extra ammunition.

"The summons is estimated to affect 500,000 active Coinbase customers and would result in the production of millions of pages of associated records, many of which contain personally identifiable information ... Based on the information before us, this summons seems overly broad, extremely burdensome, and highly intrusive to a large population of individuals," says the letter, which is signed by Sen. Orrin Hatch (R-Ut), Chairman of the Senate Finance Committee, and by Vern Buchanan and Kevin Brady, who head the House Committee on Ways and Means. (my emphasis)

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The Republicans' concerns echo those of Coinbase and its customers, who argue the IRS does not need every single Coinbase account to carry out its audit, and that the investigation sweeps in people who have clearly done nothing wrong.

The tax agency, for its part, has pointed out that only 802 Coinbase users filed a tax form related to bitcoin in 2015, which suggests large number of people have failed to declare capital gains related to bitcoin.

The IRS investigation also comes at a time when the price of bitcoin has been on an incredible tear, climbing from $13 in 2013 to a new high of over $2,000 last week. Those who profited from the higher prices—either by selling bitcoin for dollars or exchanging it for merchandise—are required to pay taxes on the gain.

Some Coinbase customers, however, have not sold any bitcoin at all while many others hold only a minimal amount, raising questions of why the IRS demanded information about every account.

One theory, according to a lawyer who spoke with Fortune late last year, is that the IRS's sweeping demand is a negotiating tactic to make Coinbase more cooperative, and that the two sides will reach an agreement to allow the agency to inspect some, but not all, of the accounts.

The letter from the Republicans, which asks the IRS to explain its strategy for enforcing tax payments on digital currency by June 7, is likely to put pressure on the agency to come to a deal with Coinbase.

http://fortune.com/2017/05/21/irs-bitcoin-congress/

Here's exactly why people need to get their funds out of online wallets to private/personal wallets straight away.  Any information which governments could use to find your identity will be exploited and sooner or later you'll end up paying some big taxes.

o snap!    well i tell ya people should know about coinbase by now, they are really no different than a bank
They were asked if they would cooperate with governments and replied "if asked to we will fully comply"
I think that tells enough, low and behold coinbase's dashboard is down this morning, hmmm, coincidence? or wiping old databases to protect customers? :D

I was quite expecting this at first because as we all know, earnings (without qualification) should be laid down to the government for proper tax assessment. Otherwise, there is the danger of having to succumb to tax evasion cases. The government, by virtue of its police power, have all the right to exude beyond it limits to collect what is due it. It can even be confiscatory. Thus, Bitcoin holders have to think twice in regard their online investments should government measures be put to action in the days to come. 

Yet they don't investigate Nazi Trumps refusal to produce his tax returns........

Yet another reason to abandon centralised exchanges, especially US ones.

The government wants to control every Shah of its citizens. This is very angry. I'm ready to completely switch to using bitcoin, so that the government does not know what I'm spending my money on

One more reason to avoid exchanges like the plague, at the end of the day they are going to take care about themselves and only themselves, bitcoin is peer to peer so if you want to do an exchange for fiat or a crypto then I think we should find other people to make the exchange and not use these mega exchanges that are nothing but disguised banks.

The ones that would be investigating something that is perfectly legal  (or advocating doing so) - not producing tax returns - are the Nazis and leftist fascists authoritarians.  In a free country, that which is not illegal is legal and investigating something that is legal is the trick authoritarians use the world over to control people.

Agreed that many should avoid centralized exchanges where possible.

Sometimes a centralized exchange is the most reliable exchange. Only with such an exchange it is difficult to remain anonymous. Therefore, there are many exchangers who do this anonymously. But this is not entirely legal

I guess it is hard to avoid centralized exchange because they are the one that is more reliable to transact with against other people.  Though I really love to see how this IRS office explain their action since there is actually a flaw and it is true that it really is a hard work if coinbase comply with the demands of IRS besides as what the article said, some of these people have not moved or touched their bitcoin so how they can be taxed anyway since they have not gain any profit on it yet.

Just wait until Bitcoin reaches some astronomical prices and all countries will want to take profit and suck dry some wealthy investors.

Those who profited from the higher prices—either by selling bitcoin for dollars or exchanging it for merchandise—are required to pay taxes on the gain.
I wonder how they're going to find out who bought some merchandise for Bitcoin. Do they expect them to have invoices?  :D

I do not think that this is the case where one could attach Nazi views or action. This is all nonsense. Well, I think that when creating a crypto currency very often could We brothers are special services of the leading countries of the world. Very weakly believed that they all avoided.