https://s11.postimg.org/6lbzjubo3/150113190754-irs-tax-refund-1024x576.jpg

Last year the IRS issued a summons to Coinbase.

Coinbase has over 8.4 million users and over 27 million wallets, but only 802 people total reported gains or losses to the IRS relating to Bitcoin for the 2015 tax year?

If that isn't a recipe for the IRS stepping in, I don't know what is.

Sure enough, last year the IRS demanded to see ALL of Coinbase's customer account activity from 2013 to 2015. During this time Bitcoin went from $12 to roughly $1200. A time that many investors and traders experienced huge gains.

Right on cue, the IRS wants a piece of that action.

The IRS is basically asking for information on millions upon millions of account owners...

Account owners responded.

As you can imagine the owners of these accounts did not take this news sitting down. The so called "John Doe" accounts have hired the law firm Berns Weiss to ask the judge for permission to the challenge the IRS summons of Coinbase.

Which of course the IRS pushed back saying that the anonymous customers have no standing to mount such a challenge.

The anonymous customers aren't the only ones thinking that they do have such a standing...

https://s1.postimg.org/7ajewpwbz/letter.png

Congress stepped in.

Sen. Orrin Hatch (a republican from Utah), as well as others, blasted the IRS for their summons of Coinbase saying:

"It is overly broad, extremely burdensome, and highly intrusive to a large portion of individuals."

And, they have a point!

Asking for all customer information is a direct violation of customer privacy that the exchange seems to be hoping to keep.

However, judging from the news out late yesterday, the IRS doesn't completely disagree with Congress's points...

https://s9.postimg.org/b6ha4sd9r/Only-807-_People-_Have-_Declared-_Bitcoin-for-_Tax-_Pu.png

Now, the IRS is shifting focus.

The IRS just announced that they will scale back their broad sweeping probe and no longer ask for passwords and security information/settings for all of the accounts at Coinbase.

Instead, they will focus their investigation only on the accounts that they have reason to suspect are under reporting their income.

It will be interesting to see how things proceed from here.

At least information on all of their customers won't be given out, but it will be interesting to see if the IRS is even able to obtain the requested info on those that are suspected of under reporting income...

Interesting times ahead.

Make sure you pay your taxes my friends!

Sources:

http://fortune.com/2017/07/06/coinbase-irs-summons/

Image Sources:

http://money.cnn.com/2015/03/26/pf/taxes/average-tax-refund-irs/index.html

https://news.bitcoin.com/irs-fail-audit-virtual-currencies/

https://news.bitcoin.com/807-people-declared-bitcoin-tax-purposes-according-irs/

Follow me: @jrcornel