Tuesday, November 22, 2016

Bitcoin: Andreessen Horowitz Backed Coinbase Has An IRS Problem

I shouldn't single out Andreessen Horowitz.
Draper Fisher Jurvetson was able to get a chunk of this one as well and will also be explaining to their investors why the VC's have some $117 million into Coinbase.

As Coinbase explains to their customers why the IRS via the Department of Justice has presented a very nasty summons to the company.

Here's  United States of America v. John Doe.

From Techworld:

The IRS wants to ID every US Coinbase user from 2013 to 2015
The government suspects some Bitcoin holders have been evading taxes
The U.S. Internal Revenue Service has asked a court in California to order Coinbase, a Bitcoin exchange, to hand over the identities of active U.S. users of its service from the beginning of 2013 to the end of 2015.

In a filing Thursday to the U.S. District Court in San Francisco, the IRS said it's investigating whether virtual currency users failed to report income on transactions conducted in the Bitcoin virtual currency. It's targeting Bitcoin because it's the most commonly used of a number of digital currencies.
"Because the IRS considers virtual currencies to be property, United States taxpayers can realize a taxable gain from buying, selling, or trading in virtual currencies. There is a likelihood that United States taxpayers are failing to properly determine and report any taxable gain from such transactions," it argued.

The IRS put taxpayers on notice in 2014 that they had to declare gains on virtual currency transactions. The agency says it has already found examples of attempted tax evasion using Coinbase accounts.

Two taxpayers, both of them companies, used separate accounts to conceal Bitcoin transactions as tech expenses on their tax returns, the IRS said. It also cited a third case involving a taxpayer who sent money to an offshore tax haven and brought it back into the U.S. in Bitcoin.

As a result, the IRS contends it's likely other users are also evading taxes through such schemes....MORE
Forbes leads with:
Dear Coinbase,
Please send us your customer list.
Okay, maybe it wasn’t quite that sweet, but it was definitely that broad. Last week, the Department of Justice (DOJ) filed paperwork in federal court (California Northern District Court, Case No. 3:16-cv-06658-JSC) requesting the identities of United States Coinbase customers who transferred convertible virtual currency at any time between December 31, 2013, and December 31, 2015. Coinbase, which is headquartered in San Francisco, California, is a company which facilitates transactions of digital currencies like bitcoin and Ethereum.

The request was made by the DOJ on behalf of the Internal Revenue Service (IRS); the IRS is seeking the authority to serve the “John Doe” summons on Coinbase.

A “John Doe” summons can only be served by the IRS after a federal court gives approval. By statute, a “John Doe” summons is an order that does not specifically identify the person but rather identifies a person or ascertainable group or class by their activities. Examples include investors in a particular tax shelter or account holders at a defined financial institution: the IRS has made use of the procedure when seeking information about offshore accounts related to the UBS investigation, Paypal accounts, and various credit card companies....MORE