[2018-02-28] Coinbase is Sending 13,000 Customer Records Over to the IRS

[FollowSynergy]

Coinbase investors knew this day was coming. The top US cryptocurrency exchange for bitcoin, Bitcoin Cash, Ethereum and Litecoin on Feb. 23 notified the 13,000 affected investors by email, informing them the other shoe had dropped. Coinbase will comply with a judge’s ruling in a California federal court to share customer data of 13,000 of its users with the Internal Revenue Service’s (IRS). The IRS was most concerned with accounts with at least $20,000 “in any one transaction type,” as per the court ruling.

While the number of customers affected may sound high, it’s fewer than the initial amount that the tax agency requested in December 2016 for 500,000 customer records. Coinbase deems it a partial win, reminding investors it advocated on their behalf after taking the matter to the US courts.

Among the details that the IRS asked for were “taxpayer ID, name, birth date, address, and historical transaction records for certain higher-transacting customers during the 2013-2015 period,” as per a notification on Coinbase’s website.

Coinbase investors took to Twitter to reveal their fate.

Crypto Gains

Although these Coinbase investors have been reporting their gains and losses with the tax agency already, others may not be as prepared. Recent reports suggest that only a small percentage of Americans have been reporting their cryptocurrency transactions to the IRS, based on CreditKarma data so far.

Year-to-date, a quarter-million Americans have filed their federal taxes via CreditKarma. Of that amount, fewer than 100 have disclosed cryptocurrency activity. Meanwhile, more than half of 2,000 American taxpayers that participated in a recent CreditKarma survey said they experienced crypto-fueled gains. Taxpayers have until the April 15 deadline to file.

Additionally, the same cohort has yet to report any cryptocurrency gains to Uncle Sam ever, despite the fact that many investors seemed to understand that they owe taxes on the gains.

Coinbase Influence

Coinbase boasted more than 13.3 million platform users as of October, according to data cited in CNBC. It’s unclear, however, the percentage of these users that are based in the United States.

Meanwhile, the crypto exchange’s user base surpassed the number of accounts at traditional stock brokerage Charles Schwab, whose number of users stood at 10.6 million as of Q4 2017. Coinbase in the fall added hundreds of thousands of accounts in as little as one week’s time. Meanwhile, the crypto exchange’s members have ballooned from less than 5 million in 2016.

Cryptocurrencies are taxed as property in the United States. As a result, crypto profits must be reported as capital gains while losses can be reported to offset gains.

https://www.ccn.com/coinbase-to-turn-13000-customer-records-over-to-the-irs/

[matuson]

I never trusted Coinbase. Perhaps this will provoke an outflow of capital from this service. But they don't interest me. I'm more interested in the fact that a change in the rules of the game. What Coinbase shows as its victory is actually a defeat. That 13,000 accounts aren't people? They could have put their accounts on another service.

[RamonBTC]

I’m on regulating exchanges but not the customer directly. It’s harassment and might be a hard punch to Coinbase clients who will withdraw all they’re investments and find any other online wallets without this kind of problem. Those 13000 accounts might now be prone to a lot bigger problem like income tax investigations and harassment from tax collectors syndicate who ask money in clearing your names in any liabilities. Hardware wallet would be a good investment if this breakdowns continue.

[1Referee]

I never trusted Coinbase. Perhaps this will provoke an outflow of capital from this service. But they don't interest me. I'm more interested in the fact that a change in the rules of the game. What Coinbase shows as its victory is actually a defeat. That 13,000 accounts aren't people? They could have put their accounts on another service.

Important fact that you discard here is that Coinbase is known to be the strictest exchange in this market, and that by far. If you make use of Coinbase and just blindly ignore everything because you don't care, it's more your own fault than Coinbase's fault that this is happening. This basically applies to all top tier exchanges operating a strict verification policy, and at the same time serves as an example of what other exchanges will soon be dealing with as well. I have submitted my tax report last week because I don't want to face any potential problems. It concerns only the coins I have been trading with on Bitstamp, and thus not the coins I have in my cold wallets. My cold wallet coins will for that reason never enter a centralized service again.

I somewhat regret having submitted my tax report as this resulted in me donating the tax department 24%, but it's better like this. I at least don't have to worry anymore about potential consequences, which is important as well. Not sure how long it will take for me to get rid of this nasty taste in my mouth, but life goes on.

[veleten]

what is funny that they position themselves as defenders of the faith since they sent "only" 13.000 records
their PR made it look like instead of sending 13k records they "didn't send" 500.000, so it was a huge win  
if there is a precendent,they will send whatever they will be asked for next time
probably,the selected 13.000 were the accounts with the most volumes or matching any other red flag patterns

[InvoKing]

-snip-

Although it is a federal judge who ordered it but as an old coinbase user, i take the decision to leave the boat before it shrinks months ago. Having a full control of your cryptocurrencies is a must, you cannot walk in the street while another unknown person having the keys of your house! Then it comes the debatable taxes, then i am afraid to see PayshitPal restrictions add to coinbase and dozens of accounts closed...
Keep your identities and your private keys for yourselves people.

[richardsNY]

I somewhat regret having submitted my tax report as this resulted in me donating the tax department 24%, but it's better like this. I at least don't have to worry anymore about potential consequences, which is important as well. Not sure how long it will take for me to get rid of this nasty taste in my mouth, but life goes on.

Of course you regret having handed your money over to a bunch of rat faced criminals (i.e. the authorities), but it's a good choice nonetheless. I have said it before and will say it again -- the moment you make use of whatever centralized service, they save all your logs, and keep it on their servers for ever. In other words, if the authorities raid a certain exchange, or just force it to release user information, then you can consider yourself busted. In this case busted means that you will have to pay back what was due, and maybe even a hefty fine on top of that. I will look into my own situation and do probably the same, and start thinking directly about a way to (on paper) get rid of my coins so that the authorities think I have nothing left. I remember something that Roger Ver once said -- if the authorities force you to pay your due taxes, give them what you want because it's not worth the suffering you put yourself through, because if you don't obey, they'll take it from you by force. It may not be the exact wording that he used, but it was something along those lines, and I actually agree with it. It's time for people to look into other forms of exchanging crypto currencies, because centralized services are being an utter pain in the ass.

[darkangel11]

I never trusted Coinbase. Perhaps this will provoke an outflow of capital from this service. But they don't interest me. I'm more interested in the fact that a change in the rules of the game. What Coinbase shows as its victory is actually a defeat. That 13,000 accounts aren't people? They could have put their accounts on another service.

This is what years of slavery have made us to believe, that the government is invincible and even a smallest concession from their routine is a reason to celebrate. Coinbase is trying to turn it into something positive because they know how bad it looks to an average client that invests in a decentralized currency to gain at least some control over his funds. While I actually can't blame them for sharing information on request, because they have a registered business and have to obey the law if they want to keep it tuning, I don't like that they're trying to show this as something positive. We only gave up some of the contacts. Don't worry, we are protecting some of our clients.

[figmentofmyass]

I never trusted Coinbase. Perhaps this will provoke an outflow of capital from this service. But they don't interest me. I'm more interested in the fact that a change in the rules of the game. What Coinbase shows as its victory is actually a defeat. That 13,000 accounts aren't people? They could have put their accounts on another service.

to be fair, they fought this in court for months and got the original terms thrown out. they're based in the USA and have put so much money into MSB licenses. i wouldn't expect them to disobey a court order.

what is funny that they position themselves as defenders of the faith since they sent "only" 13.000 records
their PR made it look like instead of sending 13k records they "didn't send" 500.000, so it was a huge win 
if there is a precendent,they will send whatever they will be asked for next time
probably,the selected 13.000 were the accounts with most volumes or matching any other red flag patterns

the accounts were based on this:

all users who have completed transactions of more than $20,000 through their accounts in a single year between 2013 and 2015

personally, i think it's naive to expect anything different from coinbase, but i definitely sympathize with people who will be audited over this.