Could the IRS Have Done Better Than Issuing Summons to Coinbase?

By November 27, 2016Bitcoin Business
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The recent incident involving Coinbase and IRS is well known. The US government department responsible for enforcing tax compliance had issued a John Doe summons to the leading cryptocurrency platform. The summons demanded the company to furnish details about all its customers, their entire transaction history from 2013 till 2015 and any other information associated with their accounts.

The demands of IRS have been contested by Coinbase in the court since then. According to reports, IRS may have filed the petition for John Doe summons to show some progress to the Treasury Department after its Inspector General rebuked IRS for inaction. IRS’ move has been criticized widely across the cryptocurrency industry. In spite of knowing the properties of digital currencies, the department opted to generalize the whole community as potential tax evaders instead of establishing a better framework for reporting and filing cryptocurrency related taxes.

The thought is also shared by Perry Woodin, the CEO of Node40, who was recently interviewed by one of the online financial news outlets. He was reported by the publication stating that the customers of Coinbase would have obviously bought and held or sold the digital currency during the period of 2013 and 2015. But in the absence of proper guidelines, it is impractical to accept everyone to report gains or losses and file appropriate taxes.

Instead of going after Coinbase’s customers, it would have served better if IRS had put some effort into updating the tax guideline regarding cryptocurrencies. Also, the department could have made it easier for the taxpayers by creating a software system that would help cryptocurrency users calculate their taxes.

The volatile nature of Bitcoin and the complicated classification of the digital currency as multiple assets by different government bodies in the United States makes the whole process difficult for the users to wrap their head around.

The outcome of Coinbase’s appeal against IRS’ summons and its potential impact on the cryptocurrency ecosystem in the United States is yet to be known.

Ref: Financial Magnates | Image: NewsBTC

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