Bad news for the Bitcoin community! In the days following Internal Revenue Service’s (IRS) John Doe summons to Coinbase, the federal court in the Northern District of California has ruled in favor of the department. The ruling comes after Coinbase filed an appeal, seeking clarification about the extent of IRS authority and validity of the summons.
With the latest ruling authorizing the IRS to serve John Doe summons to Coinbase, the digital currency platform will be forced to comply with the demands. As of now, the IRS has asked for complete records of the Bitcoin exchange’s customers between 2013 and 2015. The records in question include account information, transaction history, and details of any changes made to the account during the defined period.
The request for issuance of John Doe summons to Coinbase was made by the Department of Justice on behalf of the IRS at the California Northern District Court earlier this month. The Department of Justice and the federal court have now set a new precedent by validating the summons.
The presiding judge, Jacqueline Scott Corley, was quoted by news outlets saying:
“based on a review of the Petition and supporting documents, the Court has determined that the “John Doe” summons to Coinbase, Inc. relates to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws and that the information sought to be obtained from the examination of the records of testimony are not readily available from other sources.”
Once the John Doe summons is complied with, it is still uncertain about how the IRS will use the information. At present, there is no easy way to file taxes for cryptocurrency related capital gains due to complicated tax laws and lack of better software for calculation. There are also concerns about the future actions of IRS if the investigation does reveal few tax violations, intentional or otherwise.
Any adverse action on the part of IRS is expected to have widespread implications on the growing cryptocurrency ecosystem. It is advisable for the government body to tread lightly instead of further complicating the already delicate situation brought upon by the introduction of BitLicense and other similar regulations.
Ref: WSJ | Forbes | Image: Clyde Robinson (Flickr)