IRS Targets Tax Evaders Using Bitcoin
There is some very worrying news for Bitcoin users in the US as the Internal Revenues Service is apparently on the hunt for Bitcoin users who are evading tax. It is been reported in the New York Times that the IRS sent what is called a “ broad request” to the largest Bitcoin exchange Coinbase in which they are “requesting” all the records of their customers from 2013 to 2015.
Needless to say this has got major ramifications for the virtual currency in the US and beyond. One of the main attractions of Bitcoin is anonymity. However this anonymity is exactly what law enforcement agencies have been warning about in that it offers criminal or in this case tax evaders a much smaller chance of being tracked.
The document being issued by the IRS is called a John Doe summons and includes at least three recent cases in which Bitcoin users evaded tax, According to the IRS there are many more people who are exploiting the anonymity of Bitcoin to also evade taxes. The summons by the IRS to Coinbase follows criticism from the Treasury Department’s inspector general who was not impressed with the IRS handling of virtual currencies.
The report delivered in September did not mince words and said,” None of the I.R.S. operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currencies.”
Coinbase were understandably concerned on the scope of the enquiry yet stated they wanted to work with law enforcement. Their head counsel Juan Suarez said,” We want to work with law enforcement — that’s generally our policy. But we can’t tolerate sweeping fishing expeditions. We are very concerned about the financial privacy rights of our customers.”