On November 29, a federal court ordered Coinbase, Inc. to deliver customer records to the IRS. This decision follows litigation between the IRS and Coinbase dating back to November 2016. At that time, the IRS served a summons on Coinbase requesting a broad range of customer information. The IRS argued that they needed all the Coinbase customer records because taxpayer compliance for Bitcoin transactions was abysmal. But Coinbase fought back against the breadth of the IRS request.
Partial Victory over IRS
Although the district court judge ordered Coinbase to hand over documents to the IRS, Coinbase considers this a partial victory. The IRS will not get all the documents that it originally requested. Instead, the judge cut back on the IRS’s request.
Coinbase only has to provide documents on transactions (buy, sell, send or receive) that totaled at least $20,000 during the 2013-2015 period. The original IRS request would require Coinbase to deliver records for nearly a half million customers. But Coinbase estimates that the revised court order is only going to impact 14,000 customers.
Will this lead the IRS to start a voluntary disclosure program for Bitcoin? Now that the IRS has obtained access to customer records, more taxpayers may be thinking about voluntary disclosure. A leading tax publication reported that last month, at a symposium in Texas, a representative from the Department of Justice Tax Division stated that they may consider a separate voluntary disclosure program for Bitcoin.