IRS And Bitcoin: Court Lets Feds Demand Identities Of Coinbase Customers

The IRS is going after America’s largest Bitcoin service, the Justice Department announced Wednesday.

A federal judge in California authorized a summons requiring Coinbase, which is headquartered in San Francisco, to provide the IRS with information on users who conducted transactions from 2013 to 2015.

The move is an effort to identify tax evaders.

“As the use of virtual currencies has grown exponentially, some have raised questions about tax compliance,” Principal Deputy Assistant Attorney General Caroline D. Ciraolo, who is head of the Justice Department’s Tax Division, said in a statement. “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.”

Meanwhile, Coinbase promised to fight the summons.

“We are aware of, and expected, the Court’s ex parte order today,” said a Coinbase spokesperson on Reddit. “As we stated before, we look forward to opposing the DOJ’s request in court.”

The Justice Department says there is no allegation in the suit that Coinbase has engaged in any wrongdoing, but that the IRS is using the John Doe summonses to get records about possible violations of internal revenue laws by individuals whose identities are not known. The summons is an effort to identify American taxpayers who have used Bitcoin services to evade paying taxes.

“Transactions in virtual currency are taxable just like those in any other property,” said IRS Commissioner John Koskinen in a release. “The John Doe summons is a step designed to help the IRS ensure people doing business in the emerging economy are following the tax laws and meeting their responsibilities.”