Coinbase Turns Over Data of 13,000 Customers To IRS

Coinbase—the popular, United States-based cryptocurrency exchange and wallet service— sent notice to thousands of its users that it would be turning over their information to the U.S. Internal Revenue Service (IRS).

Customers of Coinbase started receiving notifications Friday that their personal information would be provided to the nation’s tax collecting agency. The records of more than 13,000 people are expected to be handed over by Coinbase.

Affected customers will have their taxpayer ID, name, birth date, address and historical transaction records that took place between 2013 and 2015 handed over to the IRS from Coinbase. The information is to be provided to the IRS within the next 21 days.

While 13,000 is a sizable block of users—though just a fraction of Coinbase’s 13 million total users—it represents a much smaller sample than the IRS was originally hoping for. The government agency requested in July 2017 that Coinbase turn over information on more than 500,000 users.

A court order in November 2017 reduced the figure to 14,000 users before dropping to 13,000 that are considered to be “high-transacting customers.” The threshold for such a customer was not defined by Coinbase, though the IRS at one point specifically sought the information of customers who owned or traded $20,000 or more.

For the IRS, the interest in the user information is simple: the government agency is looking for people who may have failed to report income earned through cryptocurrency trading.

Earlier this year, Forbes reported that just 0.04 percent of tax filers in the U.S. have reported their cryptocurrency gains or losses to the IRS. About seven percent of Americans are estimated to own cryptocurrency, suggesting the vast majority have failed to report information on the holdings to the IRS.

Coinbase informed its users in its letter that the company is “unable to provide legal or tax advice” and recommended its customers to “seek legal advice from an attorney promptly” if they have any questions.

Earlier this year, a number of Bitcoin communities gained attention after users had meltdowns upon learning they had to pay taxes on earnings generated from investing in Bitcoin and other cryptocurrencies. “Fuck taxes man,” on user wrote upon learning of his tax bill. “This is so fucked it's like I didn't earn anything.”

Bitcoin’s price has primarily held steady for the last few weeks after starting 2018 with a precipitous drop that wiped out more than 50 percent of the cryptocurrency’s value. Reports about Coinbase handing over customer data to the IRS reportedly drove the price of the cryptocurrency down briefly below $10,000 though it has since recovered.